India is pressing for the BRICS nations to link their central bank digital currencies (CBDCs) for cross-border commerce while opposing the establishment of a unified payment network for the group. According to those involved with the talks, Prime Minister Narendra Modi’s administration favors bilateral CBDC ties and more usage of local currencies over a unified system that would be seen as anti-Western or anti-dollar, especially since India is chairing BRICS this year.
Although talks are ongoing, it seems doubtful that a single BRICS-wide payments network would be decided upon at the leaders’ meeting in New Delhi on September 12–13.
The approach reflects India’s cautious position on reshaping the global payments system. The BRICS nations have been looking for methods to lessen their reliance on the current global infrastructure, including as SWIFT. Following Russia’s invasion of Ukraine in 2022, a number of Russian banks were barred from SWIFT, which made the issue more significant.
However, India is hesitant to develop a bloc-wide alternative that would be seen as a direct rival to the system that is controlled by the West. Instead, it wants countries to connect their own CBDC systems so that bilateral trade can be settled more directly.
Under such an arrangement, two countries could connect their digital currencies and use them for cross-border transactions without necessarily building a completely new payment network for all BRICS members. India also supports greater use of local currencies in trade instead of relying on a third currency, particularly the US dollar.
Local-currency settlement is already gaining ground within the bloc. According to Ivan Nosov, CEO of Sberbank in India, established rupee-ruble systems currently account for almost 96% of India’s commerce with Russia. According to Russian news source Interfax, nearly all commerce between China and Russia is also handled in yuan and rubles.
While China and Russia have been testing their separate CBDCs, India has been creating its own digital rupee. BRICS countries could also look at connecting their instant payment systems, which are mainly designed for retail transactions.
India already has experience with cross-border payment links. Its Unified Payments Interface (UPI) has been connected with Singapore’s PayNow for remittances. Modi has also called for similar links with countries that have large Indian diaspora populations.
The Reserve Bank of India is separately working to promote the international use of the rupee and local currencies. RBI Governor Sanjay Malhotra has said the central bank will continue efforts to encourage local-currency payments for international trade.
Economists say wider use of domestic currencies could also help countries manage their foreign-exchange reserves. If routine trade can be settled in local currencies, countries may be able to preserve their dollar reserves for strategic imports and other important requirements.
Still, India is keeping its position measured. Randhir Jaiswal, a spokesman for the Ministry of External Affairs, advised media to wait for the joint statement, stating that it was premature to draw conclusions from the talks between the central bank governors and the finance ministers of the BRICS.
For India, the goal seems to be pragmatic rather than ideological: facilitate cross-border transactions, increase the use of CBDCs and local currencies, but refrain from establishing a financial framework that would make BRICS appear to be an overtly anti-dollar coalition. The New Delhi summit will show how far other members are willing to follow that approach.
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