RBI flags geopolitical tensions as key risk to cross-border payments

The Reserve Bank of India (RBI) has highlighted geopolitical tensions as a key risk for cross-border payments and financial flows, citing the centralised nature of global financial infrastructure and dependence on a few major settlement currencies.

- SUBRATA PANDA

“Sanctions, restrictions on financial systems or currencies, and other operational barriers can disrupt markets and access. Affected countries may respond by developing bilateral or multilateral alternatives to safeguard against such disruptions,” the central bank cautioned in its “Payments System Report”, which has presented an overview of the landscape of payment systems in India.

On the one hand, the RBI has said that cross-border payments are being transformed by technological innovation, greater investment, payment across jurisdictions, and rising remittances from work-related migration. On other hand, it has cautioned that persistent friction, including long transaction chains with multiple intermediaries in certain corridors, lack of interoperability due to fragmented data standards, and the complex processing of compliance checks and legacy platforms in technology affect their efficiency and cost-effectiveness, particularly for individuals and small businesses.

On its part, the RBI has been pursuing measures to enhance cross-border payments by encouraging various modes of collaboration with other countries, including the interlinking of Unified Payments Interface (UPI) on a bilateral and multilateral basis with fast-payment systems (FPS) of other countries for personal remittances and the acceptance of FPS via QR codes at merchant locations abroad.