As BRICS Bank head, can K V Kamath offer much-needed cure for India's infra ills?

The emergence of BRICS Bank with one of India’s veteran bankers — Kundapur Vaman Kamath — as its chief has huge significance for emerging markets economies (EMEs) and India in particular. For one, the BRICS Bank marks the creation of the first major multilateral funding agency controlled by EMEs, signalling the beginning of a gradual shift of economic power to the developing countries from the developed world. BRICS countries — Brazil, Russia, India, China and South Africa — constitute 20 percent of the world GDP and 42 percent of the world’s population and with these countries gaining more say in the world economy, a new era is in making. Choosing Kamath, who changed ICICI Bank from a small development financial institution to India’s second largest bank with global footprint, as BRICS Bank chief is a logical decision by the NDA-government. [caption id=“attachment_2239432” align=“alignleft” width=“380”]  KV Kamath[/caption] There aren’t many Indian bankers around who has support from both politicians and corporates alike. More than a regular banker, Kamath is known as a visionary, an eternal optimist, who always advocated the fundamental strengths of Indian economy in front of the world, even when the economy was struggling, hit by the ripple effects of global and domestic slowdown in the aftermath of 2008 Global Financial Crisis. Kamath’s success as BRICS Bank chief, thus, is something that every Indian can hope for. But the job wouldn’t be easy since the BRICS Bank will have to weigh the interests of all member countries. Given India’s on and off love-hate political status with China, which happens to be the major investor in the new entity, managing the priorities of BRICS Bank wouldn’t be an easy task for Kamath. But the more pertinent question is this: What does BRICS mean for India and its infrastructure woes? The mandate of the BRICS Bank, which would likely commence operations by next year, is primarily towards funding infrastructure projects in developing economies. And, precisely, this is an area where India desperately needs attention from international investors. The new entity can act as bridge. The BRICS Bank, with infrastructure development as its key focus, is indeed good news for a country like India, which faces massive funding gap to develop its roads, railways and airports. India’s infrastructure funding requirement is estimated to be around $1 trillion. With an eminent Indian banker taking its leadership, the country is likely to get a major say in the bank. The country can certainly be hopeful that the new body will be more sensitive to its infra funding woes compared with the attention received from existing multilateral funding agencies such as International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB). Going by the initial structure of the BRICS Bank, it will have a corpus of $50 billion divided equally between its five founding members, with an initial total of $10 billion in cash put over seven years and $40 billion in guarantees. Another $50 billion is expected to come from other members who join in later. Besides, there will be a currency chest of $100 billion to help countries meet their emergency cash requirements of member countries. China will contribute to the largest share of $41 billion to the reserve. Russia, India and Brazil will contribute $18 billion each, while South Africa will contribute $5 billion. For India, Kamath being at the helm of the bank can be a major boost to fuel its ambitious growth as a major global power. As a veteran banker, Kamath has always highlighted the need for more Indian banks joining the “Ivy league of global banks”. Though BRICS Bank’s creation may not directly benefit the local banks, the new world economic order with India being a major player in it can certainly facilitate an image makeover for Indian banks in the global markets. A research paper presented in the United Nations conference on trade and development in March 2014 by economist Stephany Griffith-Jones emphasises that it would be desirable for BRICS Bank to lend to middle- and low-income countries from across the world. “…This would make the bank more creditworthy, both because middle-income countries may be more creditworthy than low-income ones, and because it would ensure the benefits of geographical diversification,” the paper said. The proposed bank would provide a valuable addition to the existing network of multilateral, regional and national development banks, it said. For Kamath, this is a second stint at a multilateral agency. Kamath was part of ADB for nearly a decade before he returned to India to head ICICI Bank, then a small private bank. When Kamath stepped down from executive role in ICICI Bank in 2009, ICICI had grown to India’s largest private sector bank with total assets of nearly Rs 4 lakh crore. Kamath had a two-year stint at Infosys as its chairman, post the retirement of N R Narayana Murthy. Kamath stepped down from Infosys when Murthy returned to the firm in 2013. India will have rights to nominate the president of BRICS Bank for the initial five years, after which the post will be rotated among other member countries. The BRICS Bank, as Kamath in charge, will usher in an era of a new world economic order. It will also to work towards resolving at least part of the infrastructure concerns of an aspiring economy. (Kishor Kadam contributed to this story)