Did Modi government just scrap the SAARC Development Bank?

Even though Prime Minister Narendra Modi had proposed a SAARC Development Bank last year to fund the infrastructure needs of the region and save the developing economies from paying high borrowing costs, the NDA government has now reportedly junked the idea because the institution is unviable and will not be able to compete in size with other big multi-lateral financial institutions for financing infrastructure projects in developing countries. According to a report in Livemint,  a high-level committee under the chairmanship of the finance secretary was set up to study the viability of the proposal, which found that there was a huge gap between the equity capital of the proposed bank and the funds required for regional infrastructure development. [caption id=“attachment_2073555” align=“alignleft” width=“380”]  PTI[/caption] “The committee prepared a 600-page report going into all aspects of the issue. We studied the contributions that can be made by other multilateral institutions, funding that can be sourced through external commercial borrowing route, but the shortfall after that is still huge. Ultimately, that shortfall has to be borne by India. So we decided to explore alternatives available,” a ministry of external affairs official was quoted as saying by the Mint. Given that India is the largest economy in South Asia,  it would have had to be a major contributor of funds to the bank. SAARC countries include, India, China, Srilanka, Afghanistan, Bangladesh, Bhutan,  Maldives, Nepal and Pakistan. The idea of a Development Bank for SAARC (South Asian Association of Regional Cooperation) countries was first mooted in July 2014 at a meeting of trade ministers in Bhutan. The Bank was to provide the member countries with access to capital to finance infrastructure in order to provide an impetus to trade in goods, services and investment for development. The bank was also to be used for ensuring better connectivity by building railway lines, roads, waterways, ports and customs stations to resolve all transit issues. The Saarc Development Bank was mooted at a time when the BRICS New Development Bank (NDB) was taking shape and China had proposed an Asian Infrastructure Investment Bank. But the idea is not new. In 1998, the report of the SAARC Group of Eminent Persons (GEP) highlighted the need for a development bank for the South Asian region due to poor infra connectivity in the region and the lack of a supply base in small South Asian countries to exploit the growing demand in the region.