Govt forms panel to examine Saarc Bank proposal

New Delhi: The government has set up a committee under the chairmanship of finance secretary Arvind Mayaram to examine a proposal to establish a development bank for South Asian countries.

The idea to create a Saarc (South Asian Association for Regional Cooperation) Development Bank was unanimously endorsed by commerce ministers of the regional grouping’s eight countries at a ministerial meeting in Thimphu in July.

The members of Saarc are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri lanka. The grouping established a South Asian Free Trade Area (Safta) in 2006 with the aim of forming an economic union.

The Indian committee, comprising officials of the Reserve Bank of India, ministry of external affairs and the ministry of commerce and industry, will have its first meeting soon, a said government official on the condition of anonymity. “A consensus has to build within various stakeholders and among the member-countries, then the nitty-gritty can be worked out.”

A Saarc committee of experts comprising the commerce secretaries of the eight member countries had earlier recommended the formation of a Saarc Development bank to the Safta ministerial council, arguing that such a bank would help to meet the infrastructure funding gap in the region’s least developed countries (LDCs) and save them from high borrowing costs.

All member nations except India, Pakistan and Sri Lanka are considered LDCs.

The eighth meeting of the Safta ministerial council in Thimphu in July approved the proposal made by the committee of experts. India’s trade minister Nirmala Sitharaman skipped the event citing a busy schedule in Parliament; India was represented by senior commerce ministry officials.

“Saarc Development Bank will focus on building infrastructure in India’s neighbourhood. So, from Indian national interest viewpoint, there can be nothing better than this,” the official cited above said.

The Saarc Development Bank is being mooted at a time when the BRICS New Development Bank (NDB) is taking shape and China has proposed an Asian Infrastructure Investment Bank.

At the sixth BRICS summit, held in Fortaleza, Brazil, in July, leaders of emerging economies Brazil, Russia, India, China and South Africa agreed to mobilize their resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies through the new bank. Each of the five members will contribute $10 billion to create a capital base of $50 billion for the NDB; it’s headquarters will be in Shanghai, China, and the first president an Indian.

The official said that the Saarc bank can also do consortium lending with other multilateral banks. “If there is a big project which requires huge investment, the Saarc Development Bank can be the lead bank and it can rope in, say, the BRICS New Development Bank as a partner to fund part of the project. That kind of synergy can happen.”

Ram Upendra Das, a professor at Research and Information System for Developing Countries (RIS), a Delhi-based think tank, said a Saarc Development Bank will be important given the diverse development imperatives of South Asia including building Saarc connectivity between Saarc nations and raising funds for social needs. “All the projects in the region cannot be financed through grants and aid. A commercial angle has to be brought in for some projects where private players can join in.”