RBI Flags Geopolitical Risks to Cross-Border Payments

Understanding Cross-Border Payments

RBI Flags Geopolitical Risks to Cross-Border Payments: Cross-border payments are financial transactions where the payer and recipient are located in different countries. These transactions include both wholesale and retail payments, covering remittances, trade settlements, and business transfers.

Wholesale cross-border payments typically occur between financial institutions and involve large sums. Retail cross-border payments involve individuals or businesses, such as person-to-person or person-to-business transactions.

The growth of international trade, capital flow, and mobility of people has increased the economic importance of cross-border payments.
Static GK fact: India is the largest recipient of global remittances, with $137.7 billion received in 2024.

Risks Highlighted by RBI

In its bi-annual Payment Systems Report, the RBI warned that geopolitical tensions could disrupt international payment flows. Key risks include:

• Imposition of sanctions on specific countries or entities.
• Currency restrictions and regulatory barriers.
• Operational challenges affecting the speed and reliability of transactions.

These factors may impact both retail and wholesale cross-border payments, potentially slowing global trade and remittance flows.

Global Initiatives

Several international measures aim to strengthen cross-border payment systems:

• The G20 Roadmap addresses high cost, slow speed, limited access, and insufficient transparency in global payments.
• Bank for International Settlements (BIS) Innovation Hub supports projects like Project Hertha, Project Rialto, and Project Agora to improve payment efficiency.
• Recommendations from the Financial Stability Board (FSB) and Committee on Payments and Market Infrastructure (CPMI) provide guidelines for secure and smooth cross-border transactions.
  Static GK Tip: The BIS Innovation Hub is headquartered in Basel, Switzerland, with multiple regional centres promoting fintech innovation.

India’s Efforts

India is leveraging digital payments and international collaboration to facilitate seamless cross-border transactions:

• UPI integration with foreign Fast Payment Systems (FPSs) allows QR code acceptance at merchant locations abroad.
• Example initiatives include UPI-PayNow linkage with Singapore and Project Nexus, a multilateral international collaboration.
• These measures aim to reduce cost, improve speed, and enhance transparency for Indian remitters and businesses.
  Static GK fact: UPI processed over 10 billion transactions in 2024, with cross-border links emerging as a priority.

Future Outlook

While cross-border payments are critical to India’s economic engagement globally, geopolitical tensions pose potential risks. Strengthening digital infrastructure, regulatory alignment, and multilateral cooperation will be key to mitigating disruptions.

Static GK Tip: India has actively engaged with the G20 and BIS initiatives to enhance financial system resilience and cross-border payment efficiency.

Static Usthadian Current Affairs Table

RBI Flags Geopolitical Risks to Cross-Border Payments: