Also known as the BRICS bank, it follows soon after the establishment of the China-led Asian Investment Infrastructure Bank (AIIB). The new bank will fund infrastructure and development projects in BRICS countries - Brazil, Russia, India, China and South Africa.
The ceremony today concludes a lengthy wait since the NDB was first proposed in 2012. Disagreements over the bank's funding, management and headquarters had slowed its launch.
"Our objective is not to challenge the existing system as it is but to improve and complement the system in our own way," NDB President Kundapur Vaman Kamath said.
He added that after a meeting with the AIIB in Beijing, the NDB had decided to set up a "hotline" with the AIIB to discuss issues, and to forge closer ties between "new institutions coming together with a completely different approach."
The ceremony, held in Shanghai where the NDB's headquarters are located, was relatively low-key in comparison to a June signing of the articles of agreement for the AIIB in Beijing, which was attended by delegates from 57 countries and President Xi Jinping.
The NDB has initial capital of $50 billion, which will be expanded to $100 billion within the next couple of years.
Kamath, a former executive with India's largest private bank ICICI Bank, told Reuters earlier this month that the NDB plans to issue its first loans in April next year.
China has pledged to contribute $41 billion to the NDB, giving it the largest share of voting rights at 39.5 per cent.
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