Why BRICS Is Exploring Cross-Border Payments, and What India Actually Wants

The Lift Line

The dollar acts as a vehicle currency, even though no American is involved in the trade.

Why This Editorial Matters for Your Exam

This is the clearest available explanation of how money actually moves between countries, a mechanism most candidates can name but few can describe. It is also timely: the 18th BRICS Summit is on 12 and 13 September 2026 at Bharat Mandapam, New Delhi, under India’s chairship, which makes this a near-certain current affairs topic.

GS Paper 2: Bilateral, regional and global groupings involving India; important international institutions. GS Paper 3: Indian economy; money and banking; external sector.

Background and Context

The background is that India has held the BRICS chairship since 2026, having assumed it on 1 January 2026, under the theme “Building for Resilience, Innovation, Cooperation and Sustainability”, and will host the 18th BRICS Summit at Bharat Mandapam, New Delhi, on 12 and 13 September 2026. In the immediate background to the summit, finance ministry and central bank representatives from BRICS countries met at Jaipur on 12 and 13 August to discuss financial cooperation, payments and the wider use of national currencies in settling trade.

The Analysis

1. The mechanism, in the editorial’s own worked example. An importer in Cape Town buying cars from an exporter in Chennai does not send money directly. Because the South African bank holds no account with the Indian bank, the payment is routed through a larger international bank that deals with both, typically headquartered in London or New York. Since few banks hold both rupees and rand, the payment converts rand to dollars and dollars to rupees. The dollar is the vehicle currency, and no American party is involved.

2. SWIFT is a messaging network, not a settlement system, and this distinction is the most examinable fact in the piece. SWIFT, the Society for Worldwide Interbank Financial Telecommunication, is a Belgium-based cooperative overseen by the National Bank of Belgium along with the G-10 central banks including the US Federal Reserve. It is “a secure post-office”: institutions exchange payment instructions through it and settle the amounts separately. It is used directly by more than 11,000 institutions in over 200 countries, with smaller banks reaching it indirectly through larger ones. That indirect dependence is what makes it hard to displace.

3. The costs are documented, not asserted. Every intermediary charges a fee, and because the currencies convert twice, foreign exchange margins are paid twice. A 2019 BRICS survey conducted by Brazil found Brazilian respondents reporting margins of 2.5 per cent, rising to 8.5 per cent for payments in Africa and in some cases as high as 20 per cent.

4. The network is thinning while the traffic grows. The Bank for International Settlements found that active correspondent banking relationships fell about 20 per cent between 2011 and 2018, with regional declines from 12 to 30 per cent and Latin America worst affected, largely for commercial reasons. Payment volumes kept growing throughout. More traffic through fewer channels means concentration, less competition and greater fragility.

5. The obstacle to alternatives is a network problem compounded by a sanctions problem. An alternative system is worthless until enough banks and regulators join, and joining is risky: a bank that uses a system serving sanctioned entities, several Russian banks were cut off from SWIFT in 2022 after the invasion of Ukraine, risks sanctions itself. Russia has pushed hardest for an alternative, and that is precisely why others hesitate. This is the sharpest observation in the piece.

6. Two designs are on the table.

• Bilateral linkage of national payment systems, of which India’s UPI linked with Singapore’s PayNow for remittances is the working example. It removes intermediaries but does not scale, since every pair needs its own arrangement.
• A shared hub that each country joins once. Project Nexus, designed by the BIS and handed to a company established by six central banks including the RBI, is the leading effort. It is due to go live only in 2027 and is notably not a BRICS initiative, a detail worth noting because it shows the technical agenda is broader than the geopolitical one.

7. The CBDC leg is where the ambition lies, and where the caution belongs. Central banks would issue wholesale digital currency, a settlement asset used between banks and not the retail digital rupee held by individuals, and exchange it on a common platform. Both legs of a swap would occur simultaneously or not at all, removing the risk of paying before the counterparty does, which speeds settlement and reduces the capital banks must set aside.

Only one such platform operates today: mBridge, built by the BIS with the central banks of China, Thailand, Hong Kong and the UAE. The BIS handed it to its participants and left in October 2024, and over 95 per cent of its settlement volume is in China’s digital yuan, according to People’s Bank of China figures reported by Reuters. That figure is the strongest available argument for caution: a platform intended to reduce dependence on one currency currently runs overwhelmingly on another.

8. India’s framing is deliberate and analytically defensible. India’s proposal, reported in January, is that members link their CBDCs for trade and tourism payments. Indian officials have consistently framed payments work as cutting transaction costs and speeding settlement rather than displacing the dollar, while Russian proposals and some Brazilian economists have gone further. The context includes President Trump’s November 2024 threat of 100 per cent tariffs on BRICS countries moving away from the dollar, and a further 10 per cent on countries aligning with “anti-American” BRICS policies at the Rio summit. The threats were not carried out, but the framing incentive is obvious.

9. BRICS Clear illustrates how these ideas rise and fall. The Kazan declaration of 2024 agreed to “discuss and study the feasibility” of an independent settlement system called BRICS Clear. The Rio declaration the following year did not mention it.

Data and Institutions Vault

Prelims-grade facts:

The summit:

• India has held the BRICS chairship since 2026, having assumed it on 1 January 2026, under the theme “Building for Resilience, Innovation, Cooperation and Sustainability”.
• The 18th BRICS Summit is scheduled for 12 and 13 September 2026 at Bharat Mandapam, New Delhi.
• In the background to the summit, finance ministry and central bank representatives met at Jaipur on 12 and 13 August 2026.

The plumbing:

• SWIFT is a Belgium-based cooperative overseen by the National Bank of Belgium with the G-10 central banks, including the US Federal Reserve.
• SWIFT is a messaging network for payment instructions; settlement occurs separately.
• SWIFT is used directly by more than 11,000 institutions in over 200 countries.
• A 2019 BRICS survey conducted by Brazil found foreign exchange margins of 2.5 per cent, rising to 8.5 per cent for payments in Africa and up to 20 per cent in some cases.
• The BIS found active correspondent banking relationships fell about 20 per cent between 2011 and 2018, with Latin America worst affected.
• Several Russian banks were cut off from SWIFT in 2022 following the invasion of Ukraine.

The alternatives:

• India’s UPI was linked with Singapore’s PayNow for cross-border remittances.
• Project Nexus was designed by the Bank for International Settlements and handed to a company set up by six central banks, including the Reserve Bank of India; it is set to go live in 2027 and is not a BRICS initiative.
• mBridge is the only operating multi-CBDC settlement platform, built by the BIS with the central banks of China, Thailand, Hong Kong and the UAE; the BIS exited in October 2024.
• Over 95 per cent of mBridge settlement volume is in China’s digital yuan.
• The Kazan declaration of 2024 agreed to study the feasibility of BRICS Clear; the Rio declaration of 2025 did not mention it.
• The New Development Bank, headquartered in Shanghai, is the BRICS development finance institution.

⚠️ Watch the trap: SWIFT does not move money. It carries instructions. Describing it as a settlement or clearing system is the most common error on this topic, and it changes what “being cut off from SWIFT” actually means.

⚠️ A second trap: Wholesale CBDC used between banks is not the retail digital rupee held by individuals. The BRICS discussion concerns the former.

The Debate

FOR (reform the plumbing): The costs are measured and large, the correspondent network is thinning while volumes grow, and settling in a handful of currencies exposes every user to the monetary policy of a few issuers. Direct linkage and simultaneous settlement produce demonstrable savings that are independent of any geopolitical objective.

AGAINST (the promise exceeds the plausibility): The only operating multi-CBDC platform settles over 95 per cent of its volume in one currency, which suggests these arrangements substitute dependence rather than removing it. The network problem is severe, sanctions risk deters participation, and BRICS Clear disappeared from the declarations within a year. Meanwhile the incumbent system, whatever its cost, has liquidity, legal certainty and universal reach that no alternative can yet match.

Balanced verdict: Separate the technical agenda from the geopolitical one, because they have different prospects. Reducing double conversion, shortening intermediary chains and achieving simultaneous settlement are engineering problems with measurable returns, and Project Nexus, tellingly not a BRICS initiative, is the most advanced attempt at them. Displacing an incumbent reserve currency is a different project that depends on liquidity, depth of financial markets and legal certainty, none of which a payment rail supplies. India’s framing tracks this distinction correctly, which is why it is the analytically stronger position and not merely the diplomatically prudent one.

How to Think About This

For any proposed alternative to an incumbent network, ask the network question first: how many participants must join before the system is useful to the first joiner? Where that number is large, adoption stalls regardless of technical merit, and the incumbent’s advantage is its installed base rather than its design. This explains the persistence of SWIFT, and equally of the dollar, the QWERTY keyboard and legacy standards generally. The corollary is that successful challengers usually start in a niche the incumbent serves badly, such as low-value remittance corridors, rather than by attacking the core.

Diagram-in-Words

Takeaway Box

• SWIFT is a messaging network, not a settlement system. Institutions exchange instructions through it and settle separately. Get this right; almost everything else on the topic follows from it.
• The cost is structural: two conversions mean FX margins are paid twice, on top of a fee at every intermediary, with reported margins of 2.5 to 20 per cent.
• The network is thinning: correspondent relationships fell about 20 per cent between 2011 and 2018 while volumes grew.
• The caution that matters: mBridge, the only operating multi-CBDC platform, settles over 95 per cent of volume in the digital yuan, so an alternative can substitute dependence rather than remove it.
• India’s position is framed as cutting cost and settlement time, not displacing the dollar, and that framing is analytically stronger as well as diplomatically safer.

Source: Why BRICS Is Exploring Cross-Border Payments, and What India Actually Wants — Ujiyari.com | Free UPSC & State PCS Editorial Analysis