Beyond SWIFT: CIPS, SPFS and mBridge Grow While India Settles Russia Trade in Rupees

The news

New Delhi. An explainer by G. R. Rajeev in The Hindu asks why countries are looking beyond SWIFT, the Belgium-based network through which banks send each other payment instructions. The New Delhi Declaration from the recent BRICS Summit in the capital resolved to increase trade among members and payments in national currencies. Days earlier, Reuters quoted sources as saying India would push to link central bank digital currencies (CBDCs), the digital form of a country’s official currency, for cross-border BRICS payments; the proposal did not make the Declaration. Multiple wars and the U.S. use of the dollar as a weapon through financial sanctions are pushing Global South countries to consider bypassing SWIFT, though attempts have been patchy. China’s Cross-Border Interbank Payment System (CIPS), backed by the People’s Bank of China, was launched in 2015 to internationalise the yuan, letting banks clear cross-border yuan transactions onshore rather than through offshore hubs. It has participants in more than 120 countries, including every BRICS member except India, and processed an average of 679.8 billion yuan a day in 2025, per the South China Morning Post, while remaining far smaller than the U.S.-based Clearing House Interbank Payments System (CHIPS). Russia developed its System for Transfer of Financial Messages (SPFS) in 2014 to get around Western sanctions; after Russian banks were cut off from SWIFT in 2022, it grew to 440 entities in 2023, over 100 of them non-residents, said Alla Bakina of the Russian central bank. Project mBridge, a platform shared by several central banks’ digital currencies, groups the Bank of Thailand, the Central Bank of the UAE, the People’s Bank of China’s Digital Currency Institute, the Hong Kong Monetary Authority and the Saudi Central Bank; it reached ‘minimum viability’ in 2024 on its own mBridge Ledger. The Bank for International Settlements (BIS), which had supported it since 2019, exited on October 31, 2024, reportedly over fears that mBridge could underpin a BRICS route around sanctions on Russia. A Forbes report said that by late 2025 it was in practice “a renminbi-denominated wholesale settlement rail” for China–Gulf trade. For India, roubles and rupees now cover 96% of India–Russia trade, said Ivan Nosov, head of Sberbank in India, and 22 Russian and 17 Indian banks service it, per Reuters. The syllabus link is GS3 on the external sector and GS2 on groupings affecting India.

Static syllabus linkage

1. SWIFT is a messaging system, not a bank and not a payment system in the strict sense. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) was founded in 1973 as a cooperative owned by its member banks and is headquartered in Belgium. It carries standardised messages that tell banks to move money; the funds themselves settle through correspondent accounts and national settlement systems such as CHIPS in the United States. Because SWIFT is subject to Belgian and European Union law, EU sanctions can require it to disconnect banks. This happened to Iranian banks in 2012 and to selected Russian banks in 2022. India’s own domestic equivalent is the Structured Financial Messaging System (SFMS), developed by the Institute for Development and Research in Banking Technology (IDRBT).
2. The Bank for International Settlements is the central banks’ bank. The BIS was founded in 1930 and is based in Basel, Switzerland, and it is owned by member central banks. It hosts the Basel Committee on Banking Supervision, which sets the Basel capital norms, and runs an Innovation Hub that incubates projects such as mBridge. The RBI is a member. When the BIS withdraws from a project, the project loses a neutral international sponsor. That matters for whether other central banks see it as a public good or as one bloc’s instrument. A related marker of the yuan’s standing is the Special Drawing Right, the IMF’s reserve asset, whose basket has included the renminbi (with the dollar, euro, yen and pound) since October 1, 2016.
3. India settles trade in rupees through Special Rupee Vostro Accounts. In July 2022 the RBI allowed invoicing, payment and settlement of exports and imports in Indian rupees. Under this mechanism, an Indian authorised dealer bank opens a Special Rupee Vostro Account (SRVA) for a correspondent bank of the partner country. A vostro account is an account held by a foreign bank with a domestic bank in the domestic currency. Surplus rupee balances may be invested in government securities. This is the route through which much of India’s Russia trade now moves in rupees.
4. The digital rupee and UPI links are India’s own alternatives. The Finance Act, 2022 amended the Reserve Bank of India Act, 1934 so that ‘bank note’ includes a note in digital form, which gave the e-rupee a legal basis. The RBI began pilots of the wholesale CBDC in November 2022 and the retail CBDC in December 2022. For retail cross-border payments, India links UPI with foreign fast-payment systems, beginning with Singapore’s PayNow in February 2023. These links are run for NPCI by NPCI International Payments Ltd. They serve individuals and small merchants, not large trade settlements.

Why UPSC loves this

1. De-dollarisation is now a standard GS2 and GS3 theme. Mains questions have asked about the internationalisation of the rupee, the effect of sanctions on India’s trade, and BRICS’s economic agenda. The SWIFT explainer supplies the institutional detail such answers usually lack: which systems exist, who runs them and how large they are.
2. Prelims regularly tests payment-system acronyms. UPSC has asked about SWIFT, the SDR basket, CBDC, UPI and the RBI’s payment and settlement systems. CIPS, SPFS, mBridge and vostro accounts are the natural next set, and a statement that confuses a messaging system with a settlement system is a classic trap.
3. Essay and GS2 link finance to strategic autonomy. Essay topics on multipolarity and strategic autonomy benefit from concrete examples. India’s choice to stay out of CIPS while settling Russia trade in rupees shows it building alternatives without joining a China-led system.

Analysis

1. The alternatives are growing, but none has replaced the dollar. CIPS reaches more than 120 countries, SPFS has 440 entities and mBridge carries China–Gulf trade, yet the explainer calls progress ‘patchy’ and CIPS ‘far smaller’ than established systems. A payment rail is only as useful as the currency moving on it, and the dollar still has what others lack: deep, open capital markets, full convertibility and legal predictability. Most of the new systems serve trade among countries that already have political reasons to avoid the dollar. So the realistic outcome is a divided system, with parallel rails for sanctioned or sanction-wary trade, rather than de-dollarisation.
2. India’s absence from CIPS is a deliberate choice. Every BRICS member except India participates in CIPS. For India, joining would mean depending on a system run by China’s central bank, a country with which it has a border dispute and a large trade deficit. Rupee settlement through vostro accounts gives India most of the sanctions-resilience benefit without that dependence. The 96% rouble-rupee share of Russia trade shows the domestic route works for at least one partner. The cost is that India is building its own plumbing partner by partner, which is slower than joining an existing network.
3. Rupee settlement has a hidden problem of surplus balances. When one side of a trade relationship sells much more than it buys, the surplus side accumulates the other side’s currency. India imports far more from Russia, mainly oil, than it exports, so Russian banks tend to accumulate rupees that they can use only in India. The explainer does not give balances, but this structural issue is why the RBI allows surplus vostro funds to be invested in Indian government securities. Rupee trade is sustainable only if the partner finds enough to buy with rupees or invest in. That links the payment question back to India’s export competitiveness.
4. The BIS exit shows why neutral institutions matter. mBridge was a technical experiment under a neutral international body until concerns about sanctions evasion made the BIS step back. After the exit, it reportedly became mainly a renminbi rail for China–Gulf trade. The lesson for India’s own CBDC proposal in BRICS is that technology cannot be separated from who governs it. A BRICS CBDC link without agreed governance could end up dominated by the largest economy in the group. That may be one reason the proposal did not make it into the New Delhi Declaration.
5. The counter-view: the dollar system also serves India. India holds most of its foreign exchange reserves in dollar assets, invoices most of its trade in dollars, and receives large remittances and portfolio flows through the dollar system. A sudden move away would raise costs and could invite U.S. retaliation, a real risk given the new U.S. law allowing tariffs of up to 100% on buyers of Russian energy. The sensible position is optionality: keep full access to SWIFT and the dollar while building rupee, UPI and CBDC channels that reduce vulnerability in a crisis.

Administrator's brainstorm