BRICS Financial Architecture- Alternative to the Western System?

The BRICS financial architecture is primarily designed to promote financial diversification and strategic autonomy rather than completely replace the Western-led financial system. Although the expanded bloc has developed alternative cross-border mechanisms to reduce exposure to geopolitical risks and unilateral Western sanctions, its key financial institutions and initiatives remain closely connected to the existing global financial framework. BRICS is developing a financial architecture that aims to reduce excessive dependence on the Western-dominated global financial system and give emerging economies greater financial autonomy.

Why in the News?

• As India hosts the 18th BRICS Summit in New Delhi (12-13 September 2026), the bloc’s long-standing ambition of creating an alternative to the Western-dominated global financial system is under scrutiny.

• BRICS created institutions such as the New Development Bank (NDB) and Contingent Reserve Arrangement (CRA) to reduce dependence on the World Bank, IMF and US dollar.

• However, their functioning shows that BRICS remains deeply integrated with the existing global financial architecture.

New Development Bank (NDB)

• Established in 2015 as BRICS’ flagship financial institution.
• Intended to provide developing countries with:
  • Infrastructure and development finance.
  • Greater use of local currencies.
  • Reduced dependence on Western-dominated institutions.
  • More autonomy from traditional financial conditionalities.

Reality Check

• The NDB had targeted 30% of its portfolio in local currencies by end-2026.
• The South African rand accounted for only around 1% of outstanding bonds.
• Its first rupee-denominated bond was still under planning as late as September 2025.
• In March 2022, NDB suspended operations related to Russia following the Ukraine invasion, reflecting the importance of maintaining its access to Western financial markets.
• Russia, a founding member and 20% shareholder, subsequently gave up its turn at the rotating NDB presidency.

Scale Difference

• NDB: around $39 billion in project approvals by end-2024.
• World Bank Group: roughly $100 billion annually in commitments.
• Thus, the NDB remains significantly smaller than the institutions it was expected to challenge.

Key takeaway: The NDB has created an additional source of development finance, but it has not replaced or seriously displaced the World Bank-led system.

Contingent Reserve Arrangement (CRA)

• Established in 2015 with a corpus of $100 billion.
• Objective: provide emergency foreign-exchange support to BRICS members during financial crises and reduce dependence on the IMF.

Major Limitation

• A country can access more than 30% of its allotted share only after entering into an IMF programme.
• Therefore, the mechanism ultimately remains connected to the very institution it was intended to provide an alternative to.

Institutional Weaknesses

• No permanent staff.
• No independent surveillance mechanism.
• No dedicated research wing.
• Never activated since its creation.

Therefore: The CRA exists as a financial safety mechanism, but its design prevents it from becoming a fully independent alternative to the IMF.

BRICS and De-dollarisation

• De-dollarisation refers to reducing dependence on the US dollar in international trade, payments, reserves and financial transactions.

Despite frequent discussion, BRICS’ actual position is much more cautious.

• The 126-point Rio Declaration (2025) did not use the term “de-dollarisation”.
• Russian President Vladimir Putin stated in 2024 that BRICS had not sought to abandon the dollar.
• India opposes a common BRICS currency and is concerned about possible trade repercussions.
• South Africa considers a common currency too risky.
• China prefers gradual internationalisation of the yuan on its own terms.
• When the US threatened additional tariffs against countries pursuing “anti-American” BRICS policies, the bloc did not issue a collective response.

Why Does a Common BRICS Currency Remain Difficult?

• Different monetary and economic structures.
• Divergent national interests.
• Unequal economic weight among members.
• Limited financial integration.
• Dominance of the dollar in global trade and financial markets.
• China’s preference for promoting the yuan rather than creating a genuinely collective currency.

BRICS and the IMF

Interestingly, BRICS does not seek to eliminate the IMF.

• BRICS declarations at Kazan (2024) and Rio (2025) called for a “quota-based and adequately resourced” IMF.
• This indicates that the bloc primarily wants greater influence within the existing institution, rather than replacing it.

IMF Voting Structure

• The US holds 16.49% of IMF voting rights.
• Major IMF decisions require an 85% supermajority.
• Consequently, the US has an effective veto over major decisions.

Core contradiction: BRICS seeks greater representation in the existing global financial system while simultaneously presenting itself as an alternative to that system.

Why Has BRICS Not Created a Genuine Alternative?

Despite growing discussions around de-dollarization and reforming the global financial architecture, BRICS has yet to establish a unified alternative to the U.S. dollar or Western-led institutions such as the IMF and World Bank. Rather than operating as a cohesive economic bloc with a common currency, BRICS functions primarily as a flexible geopolitical platform for cooperation among its members. Lets a Look at why has BRICS not created a genuine alternative:-

1. Deep Economic Integration

• BRICS economies remain heavily connected to Western financial markets.
• Their banks and institutions still depend on established global financial infrastructure.

2. Dollar Dominance

• The US dollar continues to dominate international finance.
• Completely replacing it would require deep financial and monetary integration among BRICS members.

3. Divergent National Interests

• India, China, Russia, Brazil and South Africa have different economic and geopolitical priorities.
• They do not have a unified position on currency, trade or financial governance.

4. Dependence on Western Financial Institutions

• NDB continues to work with Western rating agencies.
• BRICS institutions also cooperate with the World Bank and IMF.

5. Limited Institutional Capacity

• The CRA has never been activated.
• NDB's financial scale remains much smaller than that of the World Bank.

BRICS Expansion

• Expansion to countries such as Egypt, Ethiopia, Iran and UAE reflects growing interest among Global South countries in greater financial and geopolitical autonomy.
• However, expansion also increases the challenge of achieving a common financial and monetary strategy.

What Does This Tell Us About BRICS?

• BRICS has created additional institutions, but not a parallel global financial architecture.
• Its approach is better understood as reforming and diversifying the existing system rather than replacing it.
• The bloc seeks:
  • Greater representation for developing countries.
  • More voting power in global institutions.
  • Increased use of local currencies.
  • Greater development-finance options.
  • Reduced vulnerability to unilateral financial pressure.

The Central Contradiction

• BRICS rhetoric: Build an alternative to Western financial dominance.
• BRICS practice: Operate largely within the existing Western-centred financial architecture.

Significance for India

• India can use BRICS to advocate:
  • Greater Global South representation in IMF and World Bank governance.
  • Reform of international financial institutions.
  • Greater use of local-currency settlements where economically viable.
  • More development finance for emerging economies.
• At the same time, India benefits significantly from integration with the existing global financial system.
• Hence, India’s likely approach is strategic diversification rather than complete decoupling.

Way Forward

• Strengthen NDB’s local-currency lending capacity.
• Develop deeper local-currency financial markets within BRICS.
• Make the CRA capable of providing greater support without automatic IMF dependence.
• Improve coordination among BRICS central banks.
• Develop interoperable cross-border payment systems.
• Pursue IMF quota and governance reforms.
• Avoid premature attempts to create a common BRICS currency without sufficient monetary integration.

Conclusion

BRICS is developing a financial architecture that aims to reduce excessive dependence on the Western-dominated global financial system and give emerging economies greater financial autonomy. Its two major institutions are the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA). The NDB provides funding for infrastructure and sustainable development, while the CRA offers short-term liquidity support during balance-of-payments pressures. However, their financial scale is still much smaller than institutions such as the World Bank and IMF, so they cannot yet replace the existing system. BRICS is also promoting de-dollarisation through greater use of local currencies, cross-border payment cooperation and alternative payment mechanisms. However, the dominance of the US dollar, deep global financial markets and limited economic integration among BRICS members remain major challenges.

BRICS also faces divergent national interests, especially among countries with different economic and geopolitical priorities. Its expansion increases its economic weight but makes coordination more difficult. For India, BRICS is important for strategic autonomy, development finance, Global South cooperation and reform of global financial institutions. India supports greater representation of emerging economies in the IMF and World Bank. Therefore, BRICS should be seen not as a complete replacement for the Western financial system, but as an additional and gradually expanding alternative financial framework.