India is set to contribute $18 billion to the BRICS that is a $100 billion forex reserve pool. The BRICS has signed an agreement to establish the $100 billion pool, from which the maximum $41 billion will come from China. Brazil and Russia would be contributing the same amount as India, i.e. $18 billion, while South Africa would contribute $5 billion.
The central banks of BRICS (Brazil, Russia, India, China & South Africa) entered into an Operational Agreement in Moscow on July 7, 2015. This Agreement highlights the terms of mutual support for all the member states.
The Pool will go into action on 30th of July. Highlighting the rights and obligations, the Operational Agreement also entails the working procedures of the Pool to be observed by BRICS.
The Pool is supposed to assure the mutual provision of US dollars to the BRICS members in a situation of dollar liquidity. Hence, this new insurance network is established to maintain financial stability in the member states.
The Agreement for establishing Brazil, Russia, India, China & South Africa Pool of Conventional Currency Reserves was signed on 15th of July in 2014. It was signed at the summit in Fortaleza (Brazil).
After the meeting of heads of the central banks of BRICS and finance ministers, the agreement got signed in Moscow. At times of volatility in dollar exchange rate, this Pool would help the members of BRICS to maintain financial stability.
The data of Reserve Bank of India showed that the foreign exchange reserves of India dipped by $237.5 million to $355.221 billion. The agreement comes ahead of the 2-day Summit of BRICS leaders in Ufa, Russia. The Summit has the probability to start credit facility in local currency. The first ever head of the Bank is KV Kamath who is an Indian banker.
The BRICS nations account for almost 40% of the world’s population, with nearly $16 trillion GDP.