Paper: GS – II, Subject: International Relations, Topic: Regional and global groupings, Issue: BRICS and Cross-Border Payments.
Context:
The 18th BRICS Summit, to be held in New Delhi on September 12–13, 2026 under India’s chairship, comes amid geopolitical tensions, protectionism and economic uncertainty. The summit will focus on strengthening cooperation among developing countries and improving cross-border financial connectivity.
Key Takeaways:
BRICS “POWER” Vision:
P – Principle:
- Uphold the UN Charter, international law, sovereign equality and peaceful settlement of disputes.
- Prevent power politics from weakening the rules-based international order.
O – Openness:
- Support an open global economy and resist protectionism and economic fragmentation.
- Deepen cooperation in energy, minerals, infrastructure, industry and supply chains.
W – Win-Win:
- Keep development at the centre of BRICS cooperation.
- Advance the SDGs, strengthen South-South cooperation and ensure that developing countries participate in global decision-making as equals.
E – Engine:
- Use BRICS markets, resources and capabilities as engines of global growth.
- Expand cooperation in finance, business, science, technology, AI, health, agriculture, education and smart manufacturing.
R — Responsibility:
- Members should promote peace, fairness and development despite political differences.
- Stable coordination among major members, including India and China, is important for sustained BRICS cooperation.
Why Reform Cross-Border Payments?
- International payments may pass through several correspondent banks before reaching the recipient.
- SWIFT mainly carries secure payment instructions; it does not itself transfer money.
- Smaller banks often depend on larger intermediary banks for foreign transactions.
- Multiple intermediaries, compliance checks and currency conversions increase fees and settlement time.
- Exposure to a few dominant currencies and networks can increase vulnerability to sanctions, geopolitical shocks and external monetary policies.
Alternatives Being Explored:
- Greater use of national currencies for bilateral trade.
- Direct links between domestic payment systems.
- A shared payment hub connecting fast-payment systems.
- Wholesale Central Bank Digital Currencies (CBDCs) for bank-to-bank settlement.
- Discussion of an independent settlement arrangement such as BRICS Clear.
India’s Position:
- India supports cheaper and faster transactions, wider use of national currencies and exploration of CBDCs. Its approach is largely gradual, practical and rules-based, focusing on efficiency and resilience rather than abruptly replacing the dollar.
Conclusion:
BRICS can strengthen the voice of the Global South only when political cooperation produces practical institutions. Efficient, secure and scalable payment systems can reduce vulnerabilities while promoting a more inclusive and balanced global financial order.
Source: (The Hindu)
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