BRICS nations - Brazil, Russia, India, China and South Africa - are meeting in Pretoria tomorrow, and are expected to look at the viability and feasibility of setting up a development bank that will fund infrastructure in the associate nations at the BRICS summit in Durban in March.

The bank, however, may not start functioning before 2014 and is likely to have substantially less initial paid-up capital than the amount of $240 billion that is doing the rounds currently. It may start with small paid-up capital by pooling together about $240 billion in foreign exchange reserves from BRICS countries and work on the World Bank's model. The bank will have to raise funds from the market at a concessional rate and lend further to the BRICS countries at a low rate. As the sovereign ratings of most BRICS nations are not too good, borrowing at low rates would be difficult.Thus, the bank will not have an ‘AAA' rating like the World Bank.

The BRICS Development Bank would provide pooled funds to fund various social sector and infrastructure projects. Though multilateral institutions such as the World Bank, International Monetary Fund ( IMF) and Asian Development Bank (ADB) are already doing that job, the BRICS Development Bank would help promote growth specifically in these five countries. It will provide an additional source of funding.The bank would look at project-based financing. It may not fully fund the projects but would provide credit enhancement.

India is a co-chair of the BRICS group along with South Africa taking the lead in preparing the framework and idea of BRICS development bank on lines on ADB and World Bank was formally mooted in the New Delhi summit of BRICS last year.