BRICS bank to issue first yuan-denominated bonds

New Development Bank (BRICS Bank) will issue its first yuan-denominated bonds.

The Dollar Business Bureau

The New Development Bank (NDB), also referred as the BRICS Development Bank will issue its first yuan-denominated bonds, said a senior official of the bank.

The Shanghai-headquartered bank, founded by the BRICS members (Brazil, Russia, India, China and South Africa), is looking at future funding for infrastructure projects. The decision to issue its first bond in Chinese currency shouldn't come as a surprise, especially since the bank itself is headquartered in China, plus the country currently holds the largest foreign currency reserves.

NDB’s President K V Kamath, during the recent BRICS Summit held in Ufa, Russia in April this year, had recommended that the first trenches of bonds should be issued in local currency, in order to protect the BRICS members from currency fluctuations and volatility.

The bank will issue its first five-year yuan-denominated bonds, also called green bonds, after it receives a rating from international rating agencies, the bank's vice-president for economic research, strategy and partnerships and chief risk officer Paolu Nogueira Batista also remarked. 

On Monday, Batista had outlined the bank's plans at the closing ceremony of the Shanghai Forum. Batista, however, signaled that the bank could issue more bonds denominated in local currencies of the BRICS members, including the rupee in India, at a later stage if the bank's board and local authorities support the project plans.

He said this will enable local investors to be more engaged in projects financing sustainable development since they will be exposed to less currency exchange volatility with the bank’s bonds issued in local currencies.

In April this year, the NDB had announced its first batch of loans, allotting $300 million to Brazil, $250 million to India, $180 million to South Africa and $81 million to China. All allotments have been made for financing sustainable energy projects, including solar power and hydropower.

The NDB was first proposed by India at the 4th BRICS summit held in Delhi in 2012, and the bank was officially founded in 2014 with an idea to finance sustainable developmental projects in the emerging markets and developing countries.

The Dollar Business Bureau - Jun 01, 2016 12:00 IST