HOME         WEBSITE         SUBSCRIBE           E-GREETINGS   
                               

Friday, December 26, 2014

BRICS Bank should grant loans based on projects' commercial & economic viability to ensure credibility of institutions remains high: Dr C. Rangarajan

Additional institutions needed to meet growing infrastructure demands of developing economies 

The new development bank of the group of BRICS countries has to ensure that credibility of the institution remains high, as such the assessment should be proper and commercial viability of projects should be a major criterion while giving the loans, said Dr C. Rangarajan, chairman, Madras School of Economics, former chairman of the Prime Minister Economic Advisory Council (PMEAC) and former governor of the Reserve Bank of India (RBI) at an ASSOCHAM event. 

“It should be a bank of projects and not a bank of policies, it should ensure that the loans granted are commercially and economically viable and that will enable the new institution to be able to raise adequate funds from the market and utilise it to for the purpose of lending to the various institutions,” said Dr Rangarajan while releasing a study titled ‘BRICS Development Bank – Prospects & Challenges,' conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM). 

“We should welcome the setting up of the new development bank as it would fill an important vacuum, there is the need for additional institutions to provide infrastructure finance but the new institution will be able to play its role only if it establishes its credibility in the market,” added Dr Rangarajan. 

Stressing upon the need for additional institutions to meet the growing infrastructure needs of developing economies, he said “BRICS Development Bank will be a supplemental institution to complement the existing efforts of multilateral and regional financial institutions.” 

He said that though the multilateral institutions like the IBRD (International Bank for Reconstruction and Development), ADB (Asian Development Bank), World Bank, IMF (International Monetary Fund) and others have played an important role in providing assistance to India but we need lot more of such institutes. 

“As far as World Bank is concerned India is almost reaching the limit in terms of the total amount of credit that can be given, therefore, there are more than one reason for the need for new institutions,” said Dr Rangarajan. 

He further said that in another 25 years, share of present developing economies in the global economy will be equal to share of developed economies because developed economies will at best grow at two per cent whereas minimum rate at which developing economies will grow will be five per cent. 

“Therefore, the share in the global output will change and unless the existing institutions respond to this and change the structure to reflect the changing times then I think there will always be a cry for new institutions to come up.” 

He also said that the management structure of multilateral financial institutions like the IMF or the World Bank and even the regional development banks does not clearly reflect the changing structure of the global economy as BRICS nations have just 11 per cent share in voting power in IMF however, their share in global economy is almost 20 per cent and in terms of PPP (purchasing power parity) their share is 27 per cent. 

“Therefore there is a need for additional institutions to meet the growing infrastructure needs of the developing economies,” he added.
Posted by

Blog Archive

____________________________________________________________________________________________

Disclaimer - All investments in Mutual Funds and securities are subject to market risks and uncertainty of dividend distributions and the NAV of schemes may go up or down depending upon factors and forces affecting securities markets generally. The past performance of the schemes is not necessarily indicative of the future performance and may not necessarily provide a basis for comparison with other investments. Investors are advised to go through the respective offer documents before making any investment decisions. Prospective client(s) are advised to go through all comparable products in offer before taking any investment decisions. Mutual Funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the fund will be achieved. Information gathered & material used in this document is believed to be from reliable sources. Decisions based on the information provided on this newsletter/document are for your own account and risk.


In the preparation of the material contained in this document, Varun Vaid has used information that is publicly available, including information developed in-house. Some of the material used in the document may have been obtained from members/persons other than the Varun Vaid and which may have been made available to Varun Vaid. Information gathered & material used in this document is believed to be from reliable sources. Varun Vaid however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party in this material no such party will assume any liability for the same. Varun Vaid does not in any way through this material solicit any offer for purchase, sale or any financial transaction/commodities/products of any financial instrument dealt in this material. All recipients of this material should before dealing and or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice.


Varun Vaid, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The recipient alone shall be fully responsible/are liable for any decision taken on the basis of this material. All recipients of this material should before dealing and/or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice. The investments discussed in this material may not be suitable for all investors. Any person subscribing to or investigating in any product/financial instruments should do soon the basis of and after verifying the terms attached to such product/financial instrument. Financial products and instruments are subject to market risks and yields may fluctuate depending on various factors affecting capital/debt markets. Please note that past performance of the financial products and instruments does not necessarily indicate the future prospects and performance there of. Such past performance may or may not be sustained in future. Varun Vaid, including persons involved in the preparation or issuance of this material may; (a) from time to time, have long or short positions in, and buy or sell the securities mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation in the financial instruments/products/commodities discussed here in or act as advisor or lender / borrower in respect of such securities/financial instruments/products/commodities or have other potential conflict of interest with respect to any recommendation and related information and opinions. The said person may have acted upon and/or in a manner contradictory with the information contained here. No part of this material may be duplicated in whole or in part in any form and or redistributed without the prior written consent of Varun Vaid. This material is strictly confidential to the recipient and should not be reproduced or disseminated to anyone else.


Varun Vaid also does not take any responsibility for the contents of the advertisements published. Readers are advised to verify the contents on their own before acting there upon.


Published Credits goes to following sources & all the mentioned sources as footer below the published material- Bloomberg, Valueresearch Online, Capital Market, Navindia, Franklin Templeton, Kitco, SBI AMC, LIC AMC, JM Financial AMC, HDFC AMC, The Hindu, Business Line, Personal FN, Economic Times, Reuters, Outlook Money, Business Standard, Times of India etc.