NDB plans rupee, rouble bonds

After successfully raising 3 billion yuan-denominated bonds, Shanghai-based New Development Bank (NDB) will issue rupee- and rouble-denominated bonds, its vice-president and chief operations officer Xian Zhu said on Thursday.

At a session on BRICS Business Forum here, Xian said preparations were underway and the bank had received in-principle approvals from India and Russia. “In the case of India, the signals that we got are for offshore rupee bonds.” He said the bank’s intention was to use the proceeds of the local currency to finance long-term infrastructure bonds.

NDB, more popularly known as the BRICS Bank, had earlier issued its first bonds to raise funds internationally for clean energy projects in member states. The bank sold three billion in yuan-denominated green bonds on China’s interbank market in July. The five-year green bonds attracted more than 40 domestic and overseas institutional investors. The NDB plans to raise another 10 billion yuan in green bonds in China in six months.

He said that all the BRICS countries have made their first tranche of paid-in capital, on time and in full. To reduce exchange-rate risks on borrowings, the bank has started extending loans in domestic currencies. This is particularly important as developing countries struggle with high interest rates that are pegged to the dollar, leading to spiraling debt.

When asked whether the bank would float a rating agency, Xian said that was not the mandate of the infrastructure lender. “We are a financial institution, we do not want to set up our rating arm.” However, he added that the yuan bond got AAA rating from a Chinese agency.

On whether the bank would fund projects in developing countries other than BRICS, he said, “Our plan is to consider new partners, particularly from developing countries. So, in due course, we will work with other countries, particularly developing countries, as our partners. If we see good opportunities in developing countries other than BRICS, we will seek approval from the board of directors.” He said the bank does not want to give misleading signals that it will only support green projects.

On more than one country-specific projects, he said the bank wanted inter-regional cooperation or integration. “At the moment, we are seeking support for a regional project between Russia and China on transport connecting the far-east of Russia to neighbouring provinces in China. Similarly, we can do it for India, China," he said.

When asked whether he saw competition between NDB and Asian Development Bank as the two were in the same field, Xian said the potential demand for infrastructure financing was huge. “We support each other rather than competing with each other. At the same time, we believe in market economy.”

NDB was jointly founded by China, Russia, Brazil, India and South Africa in July 2014 and opened for business a year later. The goal of the bank, with initial authorised capital of $100 billion, is to fund infrastructure projects in emerging economies for sustainable development.