Context:
• Over a decade, BRICS countries have gradually advanced mechanisms to reduce dependence on SWIFT and the US dollar–dominated global financial system.
• Goal → greater financial sovereignty + protect economies from Western sanctions.
Key Highlights:
Evolution of BRICS Financial Architecture
• Fortaleza Summit 2014 → New Development Bank (NDB) + Contingent Reserve Arrangement (CRA).
• 2017 → BRICS agreed to enhance currency cooperation → local currency swaps, settlement, direct investment.
• 2024 Kazan Summit → leaders emphasised strengthening correspondent banking in local currencies.
BRICS Cross-Border Payments Initiative (2024)
• Latest effort → develop BRICS system rival to SWIFT for cross-border settlement.
• Prototype of BRICS Pay demonstrated in Moscow (Oct 2024).
• Aim → eventually involve over 1,000 banks + institutions → reduce exposure to USD sanctions.
Existing National Platforms Already Exist
• Russia → SPFS
• China → CIPS
• India → UPI (international interoperability expanding)
• Brazil → Pix
→ These platforms exist, but interoperability is the challenge.
→ BRICS financial plumbing must link these + create a workable common architecture.
Geopolitical Drivers
• US sanctions on Russia (post-Crimea; post-Ukraine) accelerated de-dollarisation impulse.
• RMB (yuan) inclusion in SDR basket → boosted RMB acceptance.
Key Challenges / Political Economy
• BRICS nations have divergent priorities:
– China leads due to RMB systems scale.
– Russia most motivated due to sanctions.
– India & Brazil more cautious → want autonomy + protect domestic payment sovereignty.
• Without harmonisation of domestic payment sovereignty, BRICS Pay may proceed slowly.
Relevant Prelims Points:
• SWIFT → Belgium-headquartered global messaging network for secure cross-border banking communication.
• NDB headquarters: Shanghai.
• CRA → reserve pool to handle balance of payments crises.
• CIPS = China’s yuan-based cross-border payment system.
• UPI → NPCI-led instant retail payment platform; now exported to multiple countries.
Relevant Mains Points:
• De-dollarisation → strategic, but requires liquidity, trust, convertibility + settlement infrastructure.
• Cross-border payment interoperability = key for South-South financial autonomy.
• BRICS+ expansion increases possibility of currency blocs + multi-polar monetary order.
Way Forward:
• A common settlement token (not necessarily a common currency) may be more politically feasible initially.
• Modular interoperability (UPI–PIX–CIPS rails) → pilot corridors.