A master agreement on extending credit facilities in the local currencies of the five countries and a BRICS multilateral letter of credit confirmation facility agreement were signed in the presence of the leaders of the BRICS countries at the Taj Palace Hotel here.
The participating banks include the Export Import Bank of India, Banco Nacional de Desenvolimento Economico e Social (BNDES) of Brazil, State Corporation Bank for Development and Foreign Economic Affairs of Russia, China Development Bank and Development Bank of South Africa.
The master agreement would reduce dependence on hard and fully convertible currencies like the U.S. dollar and Japanese yen for transactions among BRICS nations and would help reduce transaction costs of intra-BRICS trade.
The Brazilian Development Bank, Russia's State Corporation Bank for Development and Foreign Economic Affairs, India's Exim Bank, China Development Bank Corp. and Development Bank of Southern Africa signed the "Master Agreement In Extending Credit Facility" in local currencies and the "BRICS Multilateral Letter Of Credit Confirmation Facility Agreement," a summit document shows.
The agreements are intended to reduce the demand for fully convertible currencies for transactions among BRICS nations, and thereby help reduce the transaction costs of intra-BRICS trade.
"...Such intra-BRICS initiatives will not only contribute to enhanced intra-BRICS trade and investments but would also facilitate our economic growth in difficult economic times," Commerce and Industry Minister Anand Sharma said today.
"While the new risks to global economy emanating from euro zone debt crisis and uncertainty in global energy markets will have their impact upon economic growth in the BRICS countries, I am confident BRICS countries will ... register strong growth," Sharma said.
Demand slowdown in the western markets are hurting export and growth prospects of some BRICS members including India. China, the world's second-largest economy, registered a trade deficit of USD 31.48 billion in February. The country has cut its economic growth forecast to 7.5 percent from 8 per cent.
China's economy, often referred to as the main engine for global growth, is showing signs of fatigue, adding to global risks. The country has cut its economic growth forecast for 2012 to 7.5% from 8.0%. At the same time, the BRICS leaders put pressure on the International Monetary Fund (IMF) to speed up changes to its governance structure in order to better represent the developing world.
The rapid recovery of the BRICS economies from the 2008-09 global financial crisis had "highlighted their role as growth drivers of the global economy," Singh said. BRICS Finance Ministers are designated to examine the feasibility and viability of such an initiative, and will report back by the next summit, said the declaration.
South African President Jacob Zuma said the prospect of having a BRICS bank will "have great pontential in helping us create jobs in developing countries."
Intra-BRICS trade is about $230 billion and has the potential of more than doubling to $500 billion by 2015.
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