The BRICS (Brazil, Russia, India, China and South Africa) nations-led New Development Bank (NDB) will raise $2.5-$3 billion in the next three years to lend to infrastructure projects in emerging markets such as India. The bank is trying to raise resources to meet an estimated financial need of $1 trillion a year for such projects in these markets.
NDB is now seeking a credit rating from at least two international sovereign rating agencies as it seeks to diversify funding and raise money through innovative instruments such as rupee-denominated masala bonds, NDB CFO Leslie Maasdorp said, in an interview.
In July, NDB raised 3 billion renminbi by issuing its first bonds in the Chinese market, maturing in five years which will be deployed for renewable energy projects in these countries. It aims to have a $4-$5-billion loan book in the next three years.
“We are looking at the Indian market, both onshore and offshore. From a pricing perspective, offshore masala bond is the most interesting for us right now. We are examining policy conditions that the RBI (Reserve bank of India) has set. We are speaking to the ministry of finance and external affairs and understand the legal framework because we are a multilateral bank and not registered in any single country,” Massdorp said.
The NDB was envisaged more than four years ago at the fourth BRICS summit in Delhi, and its first meeting was held in July last year.Finance ministers of all five nations are part of the board of governors of the bank which is helmed by former ICICI Bank CEO KV Kamath.Massdorp is one of the four vice presidents and represents South Africa in the bank’s management.
The bank’s vision is to support and foster infrastructure and sustainable development initiatives in emerging economies, complimenting the efforts of other existing financial institutions. It plans to obtain a high credit rating on the basis of the collective strength of all the five countries which will allow it to borrow cheap and lend at competitive rates.
In April, NDB approved its first set of loans totalling $811 million supporting renewable energy projects in each of the five countries.