Why is BRICS exploring cross-border payments? |Explained

Published 2026-09-07 · Updated 2026-09-07 · 3 min · 473 words

UPSC CSE Context

Why in News

BRICS finance and central bank representatives met in Jaipur ahead of the September summit to discuss cross-border payment alternatives.

Syllabus Connection

International relations, global economic governance, and financial systems.

Exam Relevance

Relevant for questions on de-dollarisation, multilateral cooperation, and India's digital payment diplomacy.

Core Issue

BRICS explores alternatives to dollar-dominated cross-border payments.

Key Development

India proposes linking UPI with other BRICS national payment systems.

Stakeholders

• BRICS member states
• Central banks
• SWIFT
• Correspondent banks
• Exporters and importers

Static Knowledge

High-Value Background

• Correspondent banking involves intermediary banks holding accounts with each other to facilitate cross-border payments.

Exam Linkage

• Useful for questions on international financial architecture and India's role in reforming it.

Concepts in Context

• Vehicle currency: a currency like the US dollar used as an intermediary in transactions between two other currencies.
• CBDC: central bank digital currency, a digital form of fiat money issued by a central bank.

Institutions and Mechanisms

• Bank for International Settlements (BIS) monitors correspondent banking trends.
• BRICS Payment Task Force coordinates efforts to reduce reliance on Western systems.

Dynamic Analysis

International Relations

• BRICS payment alternatives challenge US dollar hegemony but face trust deficits due to Russia's sanctions.
• Linking national payment systems could reduce transaction costs but requires harmonisation of regulations.
• India's UPI linkage proposal positions it as a leader in digital public infrastructure diplomacy.
• Geopolitical tensions within BRICS may hinder consensus on a unified payment system.

Economy

• High foreign exchange margins, up to 20% in some African corridors, burden developing economies.
• Reduced correspondent banking relationships increase concentration risk in global payments.
• Direct currency swaps could lower costs but face liquidity and convertibility challenges.
• CBDC interoperability may offer efficiency gains but requires robust technical standards.

Governance

• Regulatory divergence across BRICS complicates cross-border payment integration.
• Sanctions compliance creates legal risks for banks joining alternative systems.
• Data privacy and security standards must align for seamless digital payments.
• Institutional mechanisms like the BRICS Payment Task Force need stronger mandates.

Prelims Takeaways

• BRICS 2024 summit was held under Russia's chairmanship.

Mains Value Addition

Arguments

• De-dollarisation efforts reflect broader shifts in global economic power.
• India's UPI linkage proposal showcases its soft power in digital finance.
• Alternative payment systems could enhance financial sovereignty for developing nations.
• Success depends on overcoming geopolitical mistrust and technical barriers.

Examples

• India-Singapore UPI-PayNow linkage demonstrates feasibility of bilateral payment integration.

Data Points

• Foreign exchange margins ranged from 2.5% to 20% in BRICS survey.
• Correspondent banking relationships fell by 20% between 2011 and 2018.

Counterpoints

• Sanctions risk deters participation from countries wary of US retaliation.
• Technical interoperability and regulatory harmonisation remain significant hurdles.

Way Forward

• Pilot bilateral payment linkages among willing BRICS members to build trust.
• Develop common standards for CBDC interoperability through technical working groups.
• Engage with international bodies like BIS to ensure compliance with global norms.
• Promote transparency and data security to attract broader participation.

Primary/reference source: World Affairs