{"id":371670,"date":"2026-09-12T20:17:13","date_gmt":"2026-09-12T14:47:13","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=371670"},"modified":"2026-09-12T20:17:13","modified_gmt":"2026-09-12T14:47:13","slug":"the-brics-bank-an-alternative-that-wasnt","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/the-brics-bank-an-alternative-that-wasnt\/","title":{"rendered":"The BRICS Bank \u2014 An Alternative That Wasn\u2019t"},"content":{"rendered":"

UPSC Syllabus: Gs Paper 2- <\/strong>Bilateral, regional and global groupings and agreements involving India and\/or affecting India\u2019s interests.<\/p>\n

Introduction<\/strong><\/h2>\n

BRICS created the New Development Bank (NDB) and Contingent Reserve Arrangement (CRA) to provide developing countries with alternatives to the World Bank, IMF and dollar-dominated financial system. However, after a decade, these institutions remain much smaller and closely linked to the existing financial architecture. BRICS has therefore moved towards building a parallel financial system and greater multipolarity, rather than replacing the Bretton Woods system (global financial system centred on the World Bank and IMF).<\/p>\n

Background: Need for an Alternative Financial Architecture<\/strong><\/h2>\n
    \n
  1. Western dominance:<\/strong> The post-Second World War financial system remains centred on the World Bank and IMF<\/strong>, where developing countries have limited influence over major decisions.<\/li>\n
  2. Global South’s demand:<\/strong> BRICS seeks greater representation because of concerns over IMF conditionality, dollar dominance and Western influence<\/strong> in global financial decision-making.<\/li>\n
  3. Creation of NDB:<\/strong> Established in 2015<\/strong>, the NDB was intended to provide development finance with equal governance, fewer political conditions and greater use of local currencies.<\/li>\n
  4. Creation of CRA:<\/strong> The $100-billion Contingent Reserve Arrangement<\/strong> was created in 2015 to provide members with financial support during crises without depending entirely on the IMF.<\/li>\n
  5. De-dollarisation objective:<\/strong> BRICS also sought to increase local-currency trade and financing<\/strong> to reduce exposure to U.S. monetary policy and exchange-rate volatility.<\/li>\n<\/ol>\n

    Development So Far: Growth of the BRICS Financial Architecture<\/strong><\/h2>\n
      \n
    1. Expansion of NDB:<\/strong> The NDB has grown from five founding members to eleven<\/strong>, reflecting wider developing-country interest in alternative development financing.<\/li>\n
    2. Rising project financing:<\/strong> By the end of 2025, NDB approvals reached about $42.9 billion across 139 projects<\/strong>, covering infrastructure and social-development needs.<\/li>\n
    3. Development projects:<\/strong> NDB financing includes the Delhi-Ghaziabad-Meerut RRTS, Chinese offshore wind power, Brazilian water services and Durban port modernisation<\/strong>.<\/li>\n
    4. Alternative governance:<\/strong> The five founding members have equal voting power<\/strong>, giving the NDB a more balanced governance structure than institutions where voting power is linked more closely to economic weight.<\/li>\n
    5. Local-currency lending:<\/strong> Nearly one-quarter of NDB funding<\/strong> is now in local currencies, including the Chinese yuan, Indian rupee and South African rand.<\/li>\n
    6. Broader currency diversification:<\/strong> Around 65% of intra-BRICS trade is reportedly conducted in local currencies<\/strong>, while some China-related energy transactions have also shifted towards the renminbi.<\/li>\n<\/ol>\n

      Present Status: Complement, Not Replacement<\/strong><\/h2>\n
        \n
      1. Limited financial scale:<\/strong> The NDB’s $42.9-billion project approvals<\/strong> remain far below the scale of the World Bank, which commits roughly $100 billion annually<\/strong>, showing that the NDB is not yet a comparable financing institution.<\/li>\n
      2. Smaller capital base:<\/strong> The NDB has an authorised capital of $100 billion<\/strong>, compared with the much larger capital resources associated with the World Bank and IMF.<\/li>\n
      3. Complementary relationship:<\/strong> The NDB itself describes cooperation with other multilateral development banks, including co-financing opportunities with the World Bank Group<\/strong>, showing that it currently works alongside existing institutions.<\/li>\n
      4. Continued dollar financing:<\/strong> The NDB continues to issue U.S.-dollar bonds alongside local-currency bonds<\/strong>, showing that dollar financing remains an important part of its funding model.<\/li>\n
      5. Western market dependence:<\/strong> The NDB accesses international capital markets and its bonds carry ratings from agencies such as S&P and Fitch<\/strong>, keeping its financing connected to the wider global financial system.<\/li>\n
      6. Russia case:<\/strong> In March 2022, the NDB put new transactions in Russia on hold<\/strong> following the restrictions imposed after the invasion of Ukraine, showing the importance of maintaining international compliance and financial access.<\/li>\n<\/ol>\n

        Limitations: Why a Genuine Alternative Has Not Emerged<\/strong><\/h2>\n
          \n
        1. Structural dependence:<\/strong> The NDB follows much of the same financial model as the World Bank<\/strong>, raising funds through international capital markets and remaining part of the existing global financial architecture rather than creating a separate system.<\/li>\n
        2. CRA’s weak autonomy:<\/strong> The $100-billion CRA has never been activated<\/strong>, and members seeking more than 30% of their allocation must first enter an IMF programme<\/strong>, directly limiting its independence.<\/li>\n
        3. Institutional weakness of CRA:<\/strong> The CRA has no permanent staff, independent surveillance capacity or research wing<\/strong>, reducing its ability to operate as a full-fledged alternative to the IMF during financial crises.<\/li>\n
        4. Divergent national interests:<\/strong> BRICS members do not share one position on de-dollarisation; India rejects a common BRICS currency, South Africa considers it risky, while China favours gradual internationalisation of the yuan<\/strong>.<\/li>\n
        5. Limited collective response:<\/strong> When the U.S. threatened a 10% tariff surcharge<\/strong> against countries aligning with \u201canti-American\u201d BRICS policies, the bloc did not give a collective response, showing the limits of its financial coordination.<\/li>\n
        6. Reform rather than replacement:<\/strong> The 2024 Kazan and 2025 Rio declarations<\/strong> called for a more adequately resourced, quota-based IMF, indicating that BRICS still seeks a greater role within the existing system rather than its complete replacement.<\/li>\n
        7. Persistent Western financial dominance:<\/strong> The U.S. holds 16.49% of IMF voting rights<\/strong>, and the 85% supermajority requirement<\/strong> gives Washington an effective veto over major IMF decisions, which BRICS has not been able to overcome.<\/li>\n
        8. Rhetoric\u2013reality gap:<\/strong> BRICS speaks of reducing Western financial dominance, yet its institutions continue to use dollar financing, Western credit ratings and IMF-linked mechanisms<\/strong>, making the project more complementary than transformative.<\/li>\n<\/ol>\n

          Way Forward<\/strong><\/h2>\n
            \n
          1. Expand local-currency financing:<\/strong> BRICS can increase local-currency lending and settlements to gradually reduce dependence on dollar financing and exchange-rate risks<\/strong>.<\/li>\n
          2. Develop alternative payment systems:<\/strong> BRICS should work towards reliable alternatives to SWIFT<\/strong> to support cross-border transactions and reduce dependence on Western-controlled financial infrastructure.<\/li>\n
          3. Create BRICS credit-rating agencies:<\/strong> A credible BRICS-based credit-rating system<\/strong> can reduce dependence on Western agencies and help attract investment to developing economies.<\/li>\n
          4. Strengthen the CRA:<\/strong> BRICS should give the Contingent Reserve Arrangement<\/strong> stronger independent surveillance, research and crisis-response capacity so it can function with less IMF dependence.<\/li>\n
          5. Increase NDB’s scale:<\/strong> The NDB should expand its project financing and local-currency portfolio<\/strong> to make its role more significant in development financing.<\/li>\n
          6. Pursue gradual de-dollarisation:<\/strong> BRICS should focus on gradual financial diversification<\/strong>, as members have different economic interests and do not seek an abrupt challenge to the dollar.<\/li>\n
          7. Balance national and collective interests:<\/strong> BRICS members should give greater priority to common financial objectives <\/strong>while managing their individual economic and geopolitical interests.<\/li>\n
          8. Build supply-chain resilience:<\/strong> BRICS should cooperate on critical minerals, rare earths and resilient supply chains <\/strong>to reduce vulnerabilities from concentrated global supplies.<\/li>\n<\/ol>\n

            Conclusion<\/strong><\/p>\n

            BRICS has not replaced the Bretton Woods system<\/strong>, as the NDB and CRA remain connected to existing financial markets and institutions. However, growing local-currency financing, alternative payment mechanisms and stronger development cooperation can gradually increase the financial autonomy of the Global South<\/strong>. BRICS’ realistic path is therefore to build a parallel and more multipolar financial architecture<\/strong>, rather than abruptly dismantling the existing order.<\/p>\n

            Question for practice:<\/strong><\/p>\n

            Evaluate whether the BRICS Bank has emerged as a genuine alternative to the Bretton Woods system.<\/p>\n

            Source: <\/strong>The Hindu<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

            UPSC Syllabus: Gs Paper 2- Bilateral, regional and global groupings and agreements involving India and\/or affecting India\u2019s interests. Introduction BRICS created the New Development Bank (NDB) and Contingent Reserve Arrangement (CRA) to provide developing countries with alternatives to the World Bank, IMF and dollar-dominated financial system. However, after a decade, these institutions remain much smaller… Continue reading The BRICS Bank \u2014 An Alternative That Wasn\u2019t<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230],"tags":[8743,212,10498],"class_list":["post-371670","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","tag-bilateral","tag-gs-paper-2","tag-the-hindu","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/371670","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=371670"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/371670\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=371670"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=371670"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=371670"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}