India to propose setting up of South Asian Development Bank

New Delhi: India plans to propose the setting up of a South Asian Development Bank for financing infrastructure development in the region at a meeting of trade ministers from SAARC countries in Bhutan this week.

“Unlike the BRICS Development Bank which will fund all developing countries, the proposed South Asian Development Bank will exclusively focus on South Asia,” a Government official told Business Line.

India has already discussed the contours of the development bank with a number of SAARC (South Asian Association of Regional Cooperation) members individually.

SAARC includes India, Nepal, Sri Lanka, Pakistan, Bangladesh, Bhutan, Afghanistan, and Maldives.

Commerce Minister Nirmala Sitharaman is likely to discuss the proposal with all South Asian partners at the South Asia Free Trade Area (SAFTA) Ministerial meet starting in Thimpu on July 24, the official said.

While SAARC members will contribute to the equity and get voting rights according to their contribution, funding will also be invited from other countries.

“To get over the problem of financing the venture, the development bank will welcome investments from third countries who would also get voting rights in proportion to their contribution,” the official said.

Multilateral agencies such as ADB and World Bank would also be asked to pitch in and join as observers.

The initial corpus is yet to be decided, but it is expected to be modest. “We are going to start with a small size corpus and then leverage the corpus to pick up debt,” the official added.

Since the development bank would mostly finance infrastructure that would encourage smoother flow of trade, the whole region stands to gain.

“Smaller countries that cannot access funds from multilateral agencies such as ADB and World Bank because of tough riders can get it from the regional bank. It will result in overall development of entire South Asia,” he added.

The trade ministers will also discuss a SAARC Motor Vehicle Agreement and a Railways Agreement that would allow movement of containerised traffic in the region without loading and unloading at borders.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.