India continues to expand its payment connectivity around the world, with several Asian countries exploring links to its central bank digital currency (CBDC). As it pursues cross-border opportunities with its BRICS partners, India is also positioning itself as a potential payment hub for less-developed economies.
According to Moneycontrol, Thailand, Malaysia, and Vietnam have all conducted serious discussions with India on accepting its CBDC, the digital rupee. The UAE and Sri Lanka have also expressed interest in establishing cross-border payment rails with India.
“India’s partners gain a faster, potentially cheaper way to settle trade, tourism, or remittance payments directly in local currencies with less correspondent banks and less dollar-based routing,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Compared with stablecoins, the digital rupee’s advantage is sovereign backing rather than speed. With sovereign backing, centrals banks maintain control over areas like compliance and flows without having private issuer or reserve risks.”
Challenges with BRICS Countries
India boasts one of the world’s leading instant payment systems, UPI, which processed 24.5 billion transactions worth roughly $315 billion in August. Yet only a small fraction of that volume crossed India’s borders, underscoring the need for more streamlined international payment rails. India has consequently been working to expand connections with other countries, including its BRICS partners.
Last weekend, India hosted the 18th BRICS summit, where cross-border payments and CDBCs were key areas of discussion. Earlier this year, the Reserve Bank of India (RBI) proposed linking the member countries’ digital currencies to facilitate cross-border trade.
A Long Way to Go
But BRICS is far from a unified monetary bloc. Its members use a largely incompatible mix of currencies, while political and economic relationships can be strained and complicated.
India has also been wary of deepening its financial integration with China, according to Reuters. China’s Alipay+ has proposed connecting to India’s instant payments system for cross-border transactions, but India denied the proposal over national security concerns.
The technology is also daunting. CBDCs require countries to coordinate their platforms, FX liquidity and settlement rules, all of which still have a long way to go across the BRICS nations.
“From my understanding, this is all still in pilot mode,” Hugentobler said. “In order for this to be effective, India needs to show that linked CBDCs improve wholesale settlement, prefunding, and risk. Otherwise, they’re just duplicating existing networks on a different rail.”