India Set to Promote RBI-Backed Cross-Border CBDCs for BRICS Payments: Report

India plans to press BRICS countries to broaden the use of central bank-issued digital currencies for cross-border payments, but without endorsing a single shared payments network that might be viewed as a direct challenge to the US dollar, according to people familiar with the discussions.

As this year’s BRICS chair, Prime Minister Narendra Modi supports using central bank digital currencies to settle bilateral trade among members, the people said, requesting anonymity because the talks are confidential. They added that the chances of reaching a deal on one bloc-wide payments settlement platform at the leaders’ summit in New Delhi this weekend appear slim.

The BRICS group -- comprising China, Russia, India and South Africa -- has been exploring ways to connect members’ payment systems to lessen dependence on the SWIFT messaging network, which is largely shaped by Western countries. The push drew wider attention after multiple Russian banks were removed from SWIFT following Russia’s 2022 invasion of Ukraine.

New Delhi, however, is cautious about backing a unified BRICS payments arrangement that could be perceived as a competitor to SWIFT, the people said. They noted that such a step could frame BRICS as overtly anti-dollar or anti-Western.

Instead, India is proposing BRICS countries link up their central bank digital currencies for cross-border transactions, thereby reducing reliance on banks and cutting down on costs. India is also in favor of countries using their local currencies to settle trade, instead of resorting to a third currency, like the dollar.

The RBI declined to comment. External Affairs Ministry spokesperson Randhir Jaiswal said it was too early to draw conclusions about the agenda of the Finance Ministers-Central Bank Governors meetings that began on Wednesday, and asked journalists to wait for the joint statement.

Jaiswal said India’s approach to BRICS collaboration, including in finance, has been “development focused,” pointing to steps aimed at strengthening trade and economic linkages.

Use of local currencies in trade settlement has already risen across BRICS, especially after Western sanctions on Russia. About 96% of India’s trade with Russia is now conducted via established rupee-ruble arrangements, said Ivan Nosov, head of Sberbank in India. Nearly all trade between Russia and China is settled in yuan and rubles, according to Russian news agency Interfax.

India is already testing a digital rupee in pilot projects, while China and Russia have also been trialing their own central bank digital currencies.

BRICS leaders, including Russia’s Vladimir Putin and China’s Xi Jinping, may also consider linking their countries’ instant mobile payment platforms, which are widely used for low-value retail payments.

Similar initiatives are progressing outside BRICS as well. India recently linked its Unified Payments Interface (UPI) with Singapore’s PayNow to facilitate remittances. Modi said at an event in Mumbai this week that such connections should be extended to countries with sizable Indian communities.

India has signed agreements with central banks in the UAE, Mauritius, Maldives and Indonesia to enable trade settlement in local currencies, and more deals are under negotiation, RBI Governor Sanjay Malhotra said recently.

“We will continue our efforts to internationalize the rupee and promote the use of local currencies for cross-border payments and for trade,” the governor said.

For countries like India, expanding local-currency trade can help cushion the impact of volatile global capital movements, said Sonal Varma, a Singapore-based economist at Nomura Holdings Inc.

“Local-currency settlement can help conserve scarce dollar reserves for strategic imports while enabling routine trade financing in local currency,” she said.