NDB Current Affairs

Union Cabinet approves MoU between EXIM bank and NDB

The Union Cabinet has given its approval for signing of a MoU on General Cooperation with New Development Bank (NDB) or BRICS Bank and Export Import Bank of India (EXIM Bank). The MoU will be through the BRICS Interbank Cooperation Mechanism.

The MoU will help enhance trade and economic relations among the BRICS countries.  However there is no financial implication involved with signing of the MoU.

What is Purpose of MoU?

This MoU is a non-binding umbrella agreement. It aims at establishing a cooperation framework in accordance with the national laws and regulations. Besides it also seeks for skills transfer and knowledge sharing amongst the signatories.

Why this MoU was signed?

  • The establishment of the NDB reflects the close relations among the BRICS countries and provides a powerful instrument for increasing their economic cooperation among them.
  • The signing of MoU is necessary keeping in view the strategic relevance of cooperation for sustainable development and inclusive economic growth among BRICS countries.
  • It also reflects cooperation extended by the BRICS members in various forms for promoting and facilitating trade of goods and services as well as investments in mutual projects.

Background

The BRICS Interbank Co-operation Mechanism was established by the five banks from the BRIC nations to enhance trade and economic relations amongst the BRIC countries, and enterprises.  It proposes to sign a MOU on General Co-operation with the NDB. BRICS countries (Brazil, Russia, India, China and South Africa) are developing countries, collectively accounting for 43% of the world’s population, 15% of global trade and 20% of the world’s investment flows.

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BRICS Contingent Reserve Arrangement declared operational

The Contingent Reserve Arrangement (CRA) of BRICS nations viz. Brazil, Russia, India, China and South Africa was declared operational.

It was announced by Union Finance Minister Arun Jaitley who had chaired the Governing Council meeting of the BRICS’ CRA in New York, United States.

What is BRICS Contingent Reserve Arrangement (CRA)?

  • CRA was established in 2015 during 7th BRICS summit in July 2015. The Treaty for the establishment of BRICS CRA was signed at Fortaleza, Brazil in July 2014.
  • It is a framework that aims at providing support through additional liquidity and other means to BRICS countries at a time of economic crisis.
  • It will be providing support to BRICS countries through liquidity and precautionary instruments in response to actual or potential short-term balance of payments pressures.
  • The initial total committed resources of the CRA will be 100 billion dollars with individual commitments as follows: China ($41 billion), India ($18 billion), Brazil ($18 billion), Russia ($18 billion) and South Africa ($5 billion).
  • The CRA is generally seen as a competitor to the International Monetary Fund (IMF) and along with BRICS New Development Bank (NDB) is viewed as an example of increasing South-South cooperation.
  • Both CRA and NDB were annoucned as part of BRICS Fortaleza Declaration announed during 6th BRICS summit held in  Fortaleza, Brazil in July 2014.

Commonwealth Finance Ministers’ Meeting

Union Finance Minister Arun Jaitley also had chaired the Commonwealth Finance Ministers’ Meeting at the International Monetary Fund (IMF) headquarters in Washington DC, US.

During the meeting, two important issues were discussed and deliberated. They are (i) International Taxation-a Commonwealth Conversation around the Panama Paper (ii) Economics of Climate Change and Financing Climate Adaptation and Mitigation.

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