BRICS countries are working on options to make cross-border payments faster and cheaper, with discussions underway on linking central bank digital currencies and fast payment systems, Reserve Bank Governor Sanjay Malhotra said at the FICCI-IBA Annual Banking Conference (FIBAC) in Mumbai. 
Malhotra said cross-border payments remain an area of interest for BRICS countries as there is scope to lower transaction costs, particularly for retail payments, while also reducing settlement time. The options being considered include CBDC linkages and connecting fast payment systems used by member countries. 
The discussions are still at an early stage, with different methods and options being examined. The proposal does not represent an immediate rollout of a common BRICS payment system, but reflects efforts by member countries to improve the existing infrastructure for cross-border transactions. 
Malhotra pointed out the difference between domestic and international payment timelines. While international remittance transactions can take several hours or even days to settle, payments through systems such as UPI are completed almost instantly. 
India has already worked on similar cross-border payment linkages with individual countries. The RBI and the Central Bank of the UAE, for instance, agreed to cooperate on linking India’s UPI with the UAE’s fast payment platform, along with other payment and messaging infrastructure. The RBI has also recorded the launch of UPI and RuPay connectivity with Mauritius, allowing users from the two countries to make payments using their respective systems. 
Malhotra was scheduled to travel to Jaipur for the first meeting of BRICS Finance Ministers and Central Bank Governors, with the three-day discussions beginning the following day. The meeting is expected to provide a platform for member countries to discuss financial cooperation, payment systems and other economic issues. 
The discussions on cross-border payments come as countries seek alternatives that can reduce the time and cost involved in international transactions. For India, wider payment-system connectivity could also support trade and remittances by reducing the number of intermediaries involved in some transactions. 
Alongside payment-system integration, India is also working to increase the international use of the rupee. Malhotra said the RBI is looking to expand the number of MoUs with other central banks to facilitate bilateral trade in local currencies. 
India currently has such arrangements with Indonesia, the Maldives, Mauritius and the UAE, according to Malhotra. The central bank has been pursuing local-currency settlement as one way to reduce dependence on widely used foreign currencies for bilateral transactions. 
The RBI and Bank Indonesia signed an MoU to establish a framework for using the Indian rupee and Indonesian rupiah in cross-border transactions. The arrangement allows exporters and importers to invoice and settle eligible transactions in their respective domestic currencies, with the objective of improving transaction costs and settlement efficiency. 
A similar framework was established between India and the Maldives for the use of the rupee and Maldivian rufiyaa in bilateral transactions. The RBI’s arrangement with the UAE also provides for the use of INR and UAE dirham for cross-border transactions and includes cooperation on payment-system linkages. 
The RBI has also been using other mechanisms to support international rupee transactions, including Special Rupee Vostro Accounts. These allow authorised dealer banks to facilitate international trade settlement in INR as an additional arrangement alongside conventional settlement through freely convertible currencies. 
Malhotra said that although India already conducts trade with a number of countries in local currencies, the volumes remain relatively small and need to increase. 
The RBI Governor also discussed the impact of the ongoing West Asia conflict and other external risks on the Indian economy. He acknowledged that geopolitical tensions could affect growth in the short term but said the policy measures being taken would support stronger growth over the longer term. 
Among the measures highlighted were diversification of energy and fertiliser supplies, reducing energy intensity, greater ethanol blending, increased focus on electric vehicles, free trade agreements and steps to improve capital flows. 
Malhotra said the risks facing India extend beyond the West Asia conflict. Trade and tariff-related uncertainties and cybersecurity risks also remain areas that policymakers and the financial sector need to monitor. 
He said the Indian economy and banking sector are positioned to deal with these challenges, citing strong capital buffers, a low proportion of stressed or non-performing assets and healthy profitability in the banking system. 
Malhotra said India’s broader macroeconomic position also remains supportive. He pointed to resilient economic growth, inflation remaining largely under control and healthy foreign exchange reserves. 
The RBI has increasingly focused on strengthening the country’s cross-border payment infrastructure and expanding the role of the rupee in international transactions. Its agreements with the UAE, Indonesia and other countries show that payment connectivity and local-currency settlement are being pursued alongside wider efforts to internationalise the rupee. 
For BRICS, the current discussions are still at the consultation stage. Any eventual linkage of CBDCs or fast payment systems would require agreement on technical standards, regulations, settlement arrangements and safeguards across participating countries. The immediate focus, therefore, remains on evaluating workable options that can reduce the time and cost involved in cross-border payments. 
Source PTI