Why in News?

  • Iran is expected to join the New Development Bank (NDB), the development bank established by the BRICS
  • Iran's central bank governor Abdolnaser Hemmati said that Iran would soon become a member of the NDB.
  • His statement came ahead of the BRICS Finance Ministers and Central Bank Governors meeting hosted by India.
  • However, the NDB's corporate communications division said it could not confirm Iran's membership.
  • Therefore, Iran's membership should be understood as a proposed/expected accession, subject to the formal NDB process.

WHY IS IRAN SEEKING NDB MEMBERSHIP?

  • Iran faces extensive US and international sanctions.
  • These sanctions have increased Tehran's interest in developing alternative financial channels outside the US dollar-based financial system.
  • Iran joined BRICS as a full member on 1 January 2024.
  • Since joining BRICS, Iran has expressed its interest in becoming a member and shareholder of the NDB.

REDUCING DEPENDENCE ON US DOLLAR

  • BRICS countries have been exploring ways to reduce dependence on the US dollar in international trade and financial transactions.
  • Iran has supported greater use of national currencies for trade among BRICS members.
  • Iran is also seeking bilateral and trilateral monetary cooperation with other BRICS countries.

WHAT IS NDB?

  • The New Development Bank (NDB) is a multilateral development bank established by the five founding BRICS countries:
    • Brazil
    • Russia
    • India
    • China
    • South Africa
  • It was established in 2015.
  • Headquarters: Shanghai, China.
OBJECTIVES OF NDB The main purpose of NDB is to mobilise resources for:
  • Infrastructure development
  • Sustainable development
  • Clean energy
  • Energy efficiency
  • Transportation
  • Environmental protection
  • Water supply
  • Other development projects
It aims to support BRICS countries, emerging market economies and developing countries and complement existing multilateral and regional financial institutions.

EXPANSION OF NDB MEMBERSHIP

  • NDB began expanding its membership in 2021.
  • New members have included:
    • Bangladesh
    • United Arab Emirates
    • Egypt
    • Algeria
    • Colombia
    • Uzbekistan
  • Uzbekistan became the 10th member on 5 June.
  • The source also identifies Uruguay, Colombia, Ethiopia, Angola and Zimbabwe as prospective members.
  • Prospective members become official members after completing the accession process and depositing their instrument of accession.

IRAN’S POSITION

  • Iran has expressed its intention to join the NDB.
  • It must complete the formal accession process before becoming an official member.
  • Hence, the statement that Iran will "soon" join does not itself mean that membership has already been completed.

CAPITAL STRUCTURE OF NDB

  • Initial authorised capital: US$100 billion
  • Initial subscribed capital: US$50 billion
  • Initial paid-in capital: US$10 billion
  • The initial subscribed capital was equally distributed among the five founding members.
NDB’S DEVELOPMENT ROAD Since its establishment, NDB has approved more than 120 investment projects worth around US$40 billion. These projects cover areas such as:
  • Clean energy
  • Energy efficiency
  • Transport
  • Environmental protection
  • Water supply
  • Infrastructure
The bank increasingly presents itself as an institution supporting a just and sovereign transition in developing and emerging economies.

GOVERNANCE STRUCTURE OF NDB

Board of Governors
  • The Board of Governors consists of:
    • One Governor at the ministerial level from each member country.
    • One alternate Governor appointed by each member country.
  • It is the highest decision-making authority of the bank.
Board of Directors
  • The Board of Directors is responsible for the general operations of NDB.

SIGNIFICANCE OF IRAN JOINING NDB

For Iran
  • Provides access to another source of development finance.
  • Could help Iran pursue infrastructure and sustainable development projects.
  • Strengthens its economic engagement with BRICS countries.
  • Provides an additional channel for financial cooperation amid sanctions.
For BRICS
  • Expands the financial and economic reach of the BRICS institutional framework.
  • Strengthens cooperation among emerging economies.
  • Supports the group's broader efforts towards greater use of national currencies.
FOR GLOBAL FINANCIAL SYSTEM Iran's possible membership could contribute to the broader trend of developing alternative financial institutions and payment channels outside traditional Western-dominated financial structures. . India's Role
  • India holds the rotating BRICS chairmanship in 2026.
  • The first meeting of BRICS Finance Ministers and Central Bank Governors under India's chairmanship is an important platform for discussions on:
    • Financial cooperation
    • Development finance
    • Use of national currencies
    • Strengthening BRICS financial institutions