Abstract China has been frustrated with the slow pace of reforms, governance and greater input in global established institutions like the IMF, World Bank and Asian Development Bank. An Asian Development Bank (ADB) Report states that Asia needs US $800 billion for infrastructure investment every year till 2020. Against this, the ADB, dominated by Japan, which is also a founding member, lends no more than $10 billion a year for infrastructure. With the American- dominated World Bank and the Europe- led IMF also remaining hamstrung; the need for a multilateral body to finance the growth region of the world was real.Therefore, China came up with the idea to setup ‘multilateral development bank’ to lend money exclusively to Asia. It is hoped that the new bank will allow China which has enormous capital, to finance these projects and allow it a greater role to play in the economic development of the region consummate with its growing economic and political clout. The AIIB is expected to begin operations from 2015 with senior Chinese banker, Jin Liqun, ex-chairman of investment bank China International Capital Corp expected to be taking a lead role. The authorized capital of the bank will be $100 billion, however,the initial capital of the bank will be $50 billion. Out of the total capital, around 50 percent will be provided by China.Headquarter of the bank will be situated in Beijing.