NDB, which has previously raised funds in Chinese yuan and South African rand, is in advanced stages of discussions with the Indian central bank for its debut rupee issuance, the sources said.

It will look to raise between $400 million and $500 million through 3-5 year bonds in the first tranche, one of the sources said.

The plan comes at a time when China and India are both pushing for greater international acceptance of their currencies and as investors are seeking to diversify their assets beyond developed markets.

Earlier this week, China rolled out measures to support the development of yuan bonds in Hong Kong and, over the past few months, the Indian central bank has announced steps to allow wider investment options for foreign funds held in Indian bank accounts.

Details of the bond issuance have not been previously reported. It could not be ascertained if NDB has appointed bankers to the issue.

A spokesperson for the Reserve Bank of India did not respond to a request for comment. The sources declined to be identified as they are not authorised to speak to the media.

“NDB is working with the government of India and regulators to explore raising funds in the local markets to provide local currency finance for Indian projects,” Monale Ratsoma, the bank’s Chief Financial Officer, said in response to Reuters queries. He declined to share details on the issuance.

Final approvals for the issue are pending with the Reserve Bank of India, two other sources familiar with the conversations said. It is not clear if all government approvals have been received.

An email sent to a government spokesperson was not immediately answered.

NDB had been planning to tap the Indian rupee bond market two years ago but two of the three sources said issuance was delayed as approvals from the government and central bank did not materialise then.

Five-year Strategy

Multilateral agencies such as the World Bank’s International Finance Corporation have previously issued rupee-denominated bonds in the overseas and local markets, drawing strong investor interest.

Established in 2015 by Brazil, Russia, India, China, and South Africa, the NDB has raised about a third of its $11 billion bond issues in local currencies, primarily the yuan and South African rand, with plans to expand into other member currencies.

NDB has targeted to provide 30% of its total financing commitments over the five-year strategy period in national currencies of member countries, the bank stated in its strategy report for 2022-26.

Issuing the bonds in the Indian market will add to the liquidity and diversity of the local bond market, said one of the sources quoted above. The onshore market has more depth and will help in better price discovery, this person added.

“The issue will draw interest from a segment of investors particularly those focused on emerging markets and interested in the de-dollarisation trend, said Vivek Rajpal, Asia strategist at investment advisory firm JB Drax Honore, adding that it can also be seen as a step in the direction of rupee internationalisation.

In televised comments to a virtual BRICS summit, Putin once again blamed the Middle East crisis on the failure of U.S. diplomacy in the region.

“We call for the joint efforts of the international community aimed at de-escalating the situation, a ceasefire and finding a political solution to the Palestinian-Israeli conflict. And the BRICS states and countries of the region could play a key role in this work,” Putin said.

He did not elaborate on how such an effort might be organised.

The BRICS group includes Brazil, Russia, India, China and South Africa. It agreed in August to expand by adding Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the United Arab Emirates as members.

Russian and Western policy experts say Putin is trying to use the Gaza crisis to his geopolitical advantage as part of a strategy to court allies in developing countries and build what he calls a new world order to counter U.S. dominance.

In previous comments he has repeatedly attacked U.S. policy, urged Israel to show restraint and has expressed sympathy for the plight of Palestinians.

Last month he cautioned Israel against laying siege to Gaza in the same way that Nazi Germany besieged Leningrad during World War Two, saying a ground offensive there would lead to an “absolutely unacceptable” number of civilian casualties.

On Tuesday he said it was “terrible” that Palestinian children were dying in large numbers, adding that the sight of operations being performed on children without anaesthetics “evokes special feelings”.

“Due to the sabotage of U.N. decisions, which clearly provide for the creation and peaceful coexistence of two independent and sovereign states – Israel and Palestine – more than one generation of Palestinians has been brought up in an atmosphere of injustice towards their people, and the Israelis cannot fully guarantee the security of their state,” Putin said.

Leaders of the BRICS – Brazil, Russia, India, China and South Africa – invited the two as well as Saudi Arabia, the United Arab Emirates (UAE), Ethiopia and Egypt into the club at a summit this week in Johannesburg.

The move is aimed at increasing the BRICS’ clout as a champion of “Global South” nations, many of which feel unfairly treated by international institutions dominated by the United States and other wealthy nations.

The additions are a mixed bunch: Saudi Arabia and the UAE are wealthy oil producers, inflation-wracked Argentina is desperate for foreign investment, Iran is isolated by Western sanctions, Ethiopia is recovering from a civil war and Egypt’s economy is in crisis.

Some investors and economic analysts are sceptical that expansion will lead to increased foreign direct investment (FDI) within the bloc.

“Egypt has already been expecting a lot of FDI from Saudi… and the Gulf money is not coming – and it is not because they are not in the BRICS organisation, it is because the proposition is not attractive,” said Viktor Szabo, a portfolio manager at abrdn in London.

Still, BRICS leaders and other investors touted the increased economic heft from the expansion. The new members would grow the bloc’s share of global GDP to 29% from 26% and trade in goods to 21% from 18%, Li Kexin, a senior Chinese foreign ministry official, told a press briefing on Thursday.

“I don’t know if I would say it’s a game changer, but in terms of opening up consumer markets there is scale there,” said Ola El-Shawarby, deputy portfolio manager for the Emerging Markets Equity Strategy at Van Eck in New York.

Increasing trade links between existing and prospective members of the bloc have garnered attention.

“The growing trade interconnectedness seems to be providing some fundamental ground for political announcements,” said Chris Turner, global head of markets at ING.

ING calculates that since 2015, the share of core BRICS in the new candidates’ imports increased from 23% to 30%, replacing the euro area, the United States, and other developed economies.Reuters Graphics

Other analysts and investors say Iran, which is under Western sanctions, as well as the bloc’s heavyweight member China – which has long-pushed for enlargement – are among the main beneficiaries of expansion.

“China and Brazil, India will benefit in terms of easy access to oil, and Argentina and notably Iran will benefit in terms of access to markets and FDI,” said Jakob Ekholdt Christensen, senior emerging markets fixed income strategist at BankInvest in Copenhagen.

“At most, the enlargement is a benefit for the new entrants that are hungry for capital,” said Hasnain Malik, a Dubai-based managing director at Tellimer, an emerging markets research firm.

“But this assumes they would not have seen capital inflow anyway from the richer BRICS countries and that any capital provided via a BRICS institution does not jeopardise that from other multi and bilateral sources.”

A BRICS loan to Argentina could conflict with the bailouts it has received from the International Monetary Fund, which has deeper pockets, said abrdn’s Szabo.

Increasing use of national currencies to reduce U.S. dollar dependence was another goal BRICS leaders discussed at the summit in Johannesburg. They said this could help lessen their economies’ vulnerability to a strong dollar and foreign exchange fluctuations.

And with oil producer heavyweights among the newcomers, investors said this would feed speculation that Saudi Arabia might increasingly switch to non-dollar-denominated currencies for oil trade.

“The short-term consequences could be seen in oil,” said Kaan Nazli, a portfolio manager at asset manager Neuberger Berman in London.

“If oil gets priced in a currency other than the dollar for example, or at least partly… that’s a big change.”

China’s growing influence in the Gulf has unnerved the United States – an issue that came into focus this week as Saudi Arabia and the UAE signed up to join Beijing in the BRICS group of states.

The prime minister, speaking at a lecture in Singapore, was responding to a question about how his country was managing its relationship with both global powers.

He dismissed another suggestion from the audience that growing Chinese defence sales to the Middle East could impact the region’s security ties with Washington.

“We welcome any cooperation with any of the countries, but none of our relations with any specific country will be at the expense of another,” he said, adding that his country had a strong defence alliance with Washington.

Modi and Xi agreed “to direct their relevant officials to intensify efforts at expeditious disengagement and de-escalation,” Foreign Secretary Vinay Kwatra said.

Relations between the two nuclear-armed neighbours have been sour for more than three years after soldiers from both sides clashed in the Himalayan frontier in June 2020, resulting in 24 deaths.

While the situation on the nearly 3,000-km (1,860-mile)frontier has been calm since, the face-off continues in a few pockets.

On the sidelines of the BRICS summit Modi highlighted to Xi “India’s concerns on the unresolved issues along the LAC”, Kwatra said.

Modi also “underlined that the maintenance of peace and tranquillity in the border areas, and observing and respecting the LAC are essential for the normalisation of the India-China relationship,” the foreign secretary said.

This is the first time that Modi has brought up the issue directly with Xi, repeating India’s stand that has been shared with China through other ministers multiple times.

The two leaders interacted on the sidelines of the Group of 20 nations summit in Indonesia last year, but only exchanged courtesies and discussed the need to stabilise ties, the Indian government said recently.

Discussions have taken place at several levels to find solutions to border issues, but a resolution remains elusive.

Xi told Modi that improving China-India relations served the interests of the two countries and was conducive to peace, stability, and development, according to China’s official Xinhua news agency, which said the meeting was at Modi’s request.

“The two sides should bear in mind the overall interests of their bilateral relations and handle properly the border issue so as to jointly safeguard peace and tranquillity in the border region,” Xi said.

Just before the two leaders travelled to Johannesburg, military commanders held talks for five days along the Himalayan frontier in an attempt to find a breakthrough. While the two sides said the talks had been positive, there was no word on any pullback of troops on the ground.

China’s foreign and defence ministers visited India earlier this year for G20 and Shanghai Cooperation Dialogue events and met their Indian counterparts.

“We don’t want to prejudge the outcome of discussions over BRICS expansion,” he said, ahead of a summit of the group, comprising Brazil, Russia, India, China and South Africa, in Johannesburg from Aug. 22-24, which Prime Minister Narendra Modi was set to attend.

He said BRICS is discussing boosting trade in national currencies. But while Brazil and Russia had mentioned the possibility of a common currency for the bloc, that is not part of the agenda.

Russian President Vladimir Putin will address the summit virtually, while his foreign minister, Sergei Lavrov, attends it in his stead.

The physical meeting will be the first for leaders of the BRICS nations since 2019, and expansion is a major part of its agenda.

Amid dissatisfaction with the prevailing world order, around 40 nations have expressed interest in joining the group, to make it a champion of the “Global South”.

Kwatra said that as the group relies on achieving a consensus, its members would need to agree on the criteria of how it should be expanded, and the guiding principles. Indeed, all members are not yet on board with the idea of expansion.

A “substantive part” of discussions has focussed on boosting trade amongst themselves in local currencies, Kwatra said.

The New Development Bank (NDB) issued its first rand bond in South Africa last week and could consider local currency issuance in members Brazil, Russia and United Arab Emirates, Vladimir Kazbekov told a press briefing ahead of the BRICS Summit in Johannesburg on Aug. 22-24.

Founded in 2015, the NDB is the most concrete achievement of the BRICS countries – Brazil, Russia, India, China and South Africa – as they bid to turn the bloc into a counterweight to the west. However, its already slow pace of lending has been further hampered by sanctions against Russia.

“We’re going to tap (the) Indian market – rupees – maybe by October in India,” Kazbekov said.

“Now we start thinking seriously… to use one member country’s currency to finance projects with that currency in another member. Let’s say, a project in South Africa to be financed in CNY (Chinese yuan), not with USD (U.S. dollar),” he said.

Kazbekov declined to give a target size for the Indian rupee bond program, which Reuters had previously reported was in the process of being set up.

Chief Financial Officer Leslie Maasdorp told Reuters then that the bank aims to increase local currency lending, most of which has so far been in the Chinese yuan, from about 22% to 30% by 2026, but that there were limits to de-dollarisation.

The NDB is also ready to fulfil a commitment made two years ago to provide $3 billion of financing for South Africa’s “Just Transition” from mostly coal power to renewable energy, Kazbekov said.

“The commitment is still there, but no projects. That’s why we are trying to find projects,” he said.

Heightened global tensions provoked by the Ukraine war and a growing rivalry between China and the United States have added urgency to a drive to strengthen the bloc, which has at times suffered from internal divisions and a lack of coherent vision.

“An expanded BRICS will represent a diverse group of nations with different political systems that share a common desire to have a more balanced global order,” South Africa’s president, Cyril Ramaphosa, said in an address ahead of the meetings.

Boosting the use of member states’ local currencies is also on the agenda. South African summit organisers, however, say there will be no discussions of a BRICS currency, an idea floated by Brazil earlier this year as an alternative to dollar-dependence.

Ramaphosa will host Chinese President Xi Jinping, Brazil’s Luiz Inacio Lula da Silva and Indian Prime Minister Narendra Modi from Aug. 22 to 24.

Russian President Vladimir Putin, wanted under an international arrest warrant for alleged war crimes in Ukraine, will not travel to South Africa and instead join virtually.

Expansion has long been a goal of bloc heavyweight China, which hopes that broader membership will lend clout to a grouping already home to some 40% of the world’s population and a quarter of global GDP.

The leaders will hold a mini-retreat and dinner on Tuesday evening where they are likely to discuss a framework and criteria for admitting new countries.

But expansion has become a point of contention.

Russia is keen to bring in new members to counter its diplomatic isolation over its invasion of Ukraine. South Africa has also voiced support.

India, which is wary of Chinese dominance and has warned against rushing expansion, has “positive intent and an open mind”, Foreign Secretary Vinay Kwatra said on Monday. Brazil, meanwhile, is concerned that growing BRICS will dilute its influence.

While a potential BRICS enlargement remains up in the air, the bloc’s pledge to become a champion of the developing “Global South” and offer an alternative to a world order dominated by wealthy Western nations is already finding resonance.

Over 40 countries have expressed interest in joining BRICS, say South African officials. Of them, nearly two dozen have formally asked to be admitted.

His comments point to a divergence of vision as leaders of the bloc – Brazil, Russia, India, China and South Africa – arrived in Johannesburg for a summit that will weigh expanding the group as some members push to forge it into a counterweight to the West.

Heightened global tensions provoked by the Ukraine war and Beijing’s growing rivalry with the United States have pushed China and Russia – whose President Vladimir Putin will attend the meeting virtually – to seek to strengthen the BRICS bloc.

Their vision of an expanded BRICS capable of rivaling U.S. and European global dominance has, however, been met with skepticism by some members. And the outcome of the debate over enlargement could determine the future of a bloc long criticised for a lack of cohesion.

“We do not want to be a counterpoint to the G7, G20 or the United States,” Brazil’s Lula said on Tuesday during a social media broadcast from Johannesburg. “We just want to organise ourselves.”

Summit host South Africa welcomed China’s Xi Jinping, the leading proponent of enlarging BRICS, for a state visit on Tuesday morning ahead of meetings with the grouping’s other leaders planned for later in the day.

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“I am confident that the upcoming summit will be an important milestone in the development of the BRICS mechanism,” Xi said shortly after his arrival in South Africa.

South African President Cyril Ramaphosa said during a bilateral meeting with Xi that their two countries had “similar views” regarding expansion.

“We share your view, President Xi, that BRICS is a vitally important forum which plays an important role in the reform of global governance and in the promotion of multilateralism and cooperation throughout the world,” he said.

Indian Prime Minister Narendra Modi are also attending the Aug. 22 to 24 summit.

Putin, who is wanted under an international arrest warrant for alleged war crimes in Ukraine, will not travel to South Africa.

[1/9]Brazil’s President Luiz Inacio Lula da Silva gestures during a ministerial meeting to celebrate the first 100 days of his government at the Planalto Palace in Brasilia, Brazil, April 10, 2023. REUTERS/Ueslei Marcelino/File Photo Acquire Licensing Rights

Beyond the enlargement question, boosting the use of member states’ local currencies is also on the summit agenda. South African organisers, however, say there will be no discussions of a BRICS currency, an idea floated by Brazil earlier this year as an alternative to dollar-dependence.

POINT OF CONTENTION

BRICS remains a disparate group, ranging from China, the world’s second biggest economy now grappling with a slowdown, to South Africa, an economic minnow facing a power crisis that’s led to daily blackouts.

Russia is being hammered by sanctions over its war in Ukraine is keen to show the West it still has friends.

India, however, has increasingly reached out to the West, as has Brazil under its new leader.

Two members – India and China – have periodically clashed along their disputed border, adding to the challenge of decision-making in a group that relies on consensus.

Expansion has long been a goal of China, which hopes that broader membership will lend clout to a grouping already home to some 40% of the world’s population and a quarter of global GDP.

The leaders will hold a mini-retreat and dinner on Tuesday evening where they are likely to discuss a framework and criteria for admitting new countries.

Russia is keen to bring in new members.

India, which is wary of Chinese dominance and has warned against rushing expansion, has “positive intent and an open mind”, Foreign Secretary Vinay Kwatra said on Monday. Brazil, meanwhile, is concerned that expanding BRICS will dilute its influence, though Lula reiterated on Tuesday his desire to see neighbour Argentina join the bloc.

While a potential BRICS enlargement remains up in the air, the grouping’s pledge to become a champion of the developing world and offer an alternative to a world order dominated by wealthy Western nations is already finding resonance.

Over 40 countries have expressed interest in joining BRICS, say South African officials. Of them, nearly two dozen have formally asked to be admitted, with some expected to send delegations to Johannesburg.

Here are some key facts about the bloc and its members.

What Is Brics?

The acronym BRIC, which did not initially include South Africa, was coined in 2001 by then Goldman Sachs chief economist Jim O’Neill in a research paper that underlined the growth potential of Brazil, Russia, India and China.

The bloc was founded as an informal club in 2009 to provide a platform for its members to challenge a world order dominated by the United States and its Western allies.

Its creation was initiated by Russia.

The group is not a formal multilateral organisation like the United Nations, World Bank or the Organisation of the Petroleum Exporting Countries (OPEC).

The heads of state and government of the member nations convene annually with each nation taking up a one-year rotating chairmanship of the group.

Who Are The Members?

Brazil, Russia, India and China are the founding members.

South Africa, the smallest member in terms of economic clout and population, was the first beneficiary of an expansion of the bloc in 2010 when the grouping became known as BRICS.

Together the countries account for more than 40% of the world population and a quarter of the global economy.

Apart from geopolitics, the group’s focus includes economic cooperation and increasing multilateral trade and development.

The bloc operates by consensus. All the BRICS countries are part of the Group of 20 (G20) of major economies.

Which Nations Want To Join Brics And Why?

Over 40 countries, including Iran, Saudi Arabia, United Arab Emirates, Argentina, Algeria, Bolivia, Indonesia, Egypt, Ethiopia, Cuba, Democratic Republic of Congo, Comoros, Gabon, and Kazakhstan have expressed interest in joining the forum, according to 2023 summit chair South Africa.

They view BRICS as an alternative to global bodies viewed as dominated by the traditional Western powers and hope membership will unlock benefits including development finance, and increased trade and investment.

Dissatisfaction with the global order among developing nations was exacerbated by the COVID-19 pandemic when life-saving vaccines were hoarded by the rich countries.

Iran, home to around a quarter of the Middle East’s oil reserves, has said it hopes the mechanism for new membership would be decided “at the earliest.”

Oil heavyweight Saudi Arabia was among more than a dozen countries that participated in “Friends of BRICS” talks in Cape Town in June. It has received backing from Russia and Brazil to join the BRICS.

Argentina said in July 2022 it had received China’s formal support in its bid to join the group.

Ethiopia, one of Africa’s fastest-growing economies, said in June it had asked to join the bloc, with a foreign ministry spokesman saying the country will continue to work with international institutions that can protect its interests.

Bolivia’s President Luis Arce has expressed interest in BRICS membership and is expected to attend the summit. Its government said in July it was determined to curb dependence on the U.S. dollar for foreign trade, instead turning to the Chinese yuan, in line with BRICS leaders’ stated aim to reduce dependence on the U.S. currency.

Algeria said in July it has applied for BRICS membership and to become a shareholder in the New Development Bank, the so-called BRICS Bank. The North African nation is rich in oil and gas resources and is seeking to diversify its economy and strengthen partnership with China and other countries.