RBI flags geopolitical risks as key threat to cross-border payments, Pg17.

Key Highlights:

• RBI identifies geopolitical risks as a major threat to cross-border payments.
• Sanctions and financial restrictions can disrupt market access and payment channels.
• RBI is working with international partners to reduce friction in global payment systems as part of its Payments Vision Document 2025.
• UPI-based QR code payments are enabled in Bhutan, France, Mauritius, Nepal, Singapore, UAE, and Qatar.
• India received a record $137.7 billion in inward remittances in 2024.

Detailed Insights:

• Geopolitical tensions can disrupt cross-border payments due to the centralized nature of global financial infrastructure.
• Some countries are exploring alternatives to reduce their exposure to disruptions caused by sanctions.
• RBI is reviewing bottlenecks in the remittance process to make settlements faster and more efficient.
• UPI is being linked with fast payment systems (FPS) of other countries to simplify personal remittances.
• India has joined Project Nexus, a multilateral initiative to interlink domestic FPSs.
• India's large overseas workforce supports foreign exchange reserves and economic stability through remittances.

Key Concepts Involved:

• Cross-border payments: Transactions where the payer and recipient are in different countries.
• Unified Payments Interface (UPI): An instant real-time payment system developed by NPCI facilitating inter-bank transactions.
• Fast Payment System (FPS): A real-time payment infrastructure that enables instant transfer of funds.