The fledgling New Development Bank (NDB), better known as BRICS bank, will sanction its first loan to a project in India later this month, diversifying India’s options to raise long-term capital for infrastructure development.
At its scheduled board meeting on April 14, the Shanghai-based NDB is expected to sanction $250-300 million as loan to a government-run solar power project in Karnataka, a source told FE. The interest rate for the 20-year loan would be Libor (the London Interbank Offered Rate) plus a spread, comparable to rates charged by other multilateral agencies such as the World Bank. The loan would be denominated in US dollar, the source said.
To begin with, the NDB would lend to government projects under a co-financing model. State-run Canara Bank was the co-financier to the above-mentioned solar power project in Karnataka. The solar project was one of the three projects recommended by India for NDB’s consideration. The other two include an irrigation venture in Rajasthan and a road project in Madhya Pradesh.
The NDB board is also expected to sanction one loan each for the other founding members of the BRICS bank namely Brazil, Russia, China and South Africa. The board would also approve lending, borrowing and environmental policies for the bank before it commences operations.
The NDB has a subscribed capital of $50 billion while the authorised capital was $100 billion. Besides NDB, the developing countries led by China have set up a $100-billion an Asian Infrastructure Investment Bank (AIIB), which would be the second new source of funding for India’s massive infrastructure development plan. The AIIB is also expected to give its first loan to India in April-May.