With MasterCard, Visa and SWIFT now out of Russia's ambit, the alternative solutions being explored for bilateral trade include the linking of the Indian Unified Payments Interface (UPI) with the Russian Faster Payments System (FPS).
Russia and India are exploring alternate payment systems to ensure bilateral trade continues after global sanctions kicked Russia out of the existing system in response to Moscow's invasion of Ukraine. Several Russian banks were thrown out of the Society for Worldwide Interbank Financial Telecommunications (SWIFT) system, which is used for cross-border international payments. SWIFT is identical to the IFSC system that ensures domestic interbank transfers.
The alternative solutions being explored include the linking of the Indian Unified Payments Interface (UPI) with the Russian Faster Payments System (FPS) to continue trade between the two strategic partners, reported Mint.
Why is an alternative solution needed?
With payment systems like MasterCard and Visa refusing to do business with Russia and the country out of SWIFT, alternative systems are needed for bilateral trade to continue. Additionally, Russia has also been denied access to the international dollar, euro and currency markets, which further complicates matters as international trade is resolved through dollar payments.
While Russia’s trade with India is not the largest, it is strategically important as Russia remains one of the key defence exporters for India. From ammunition, weapons, tanks and modern missile systems, Russia supplies key weapons to India.
What are the solutions?
The two countries are currently discussing linking various payment systems in order to continue facilitating seamless trade and payments between the two countries, according to Dmitry A. Solodov, spokesperson for the Russian Embassy in New Delhi.
The two countries have discussed linking the RuPay and MIR Cards payment systems so that these systems are integrated with the respective national payment structures.
“Disconnecting Russian banks from Swift cannot stop our bilateral trade and bring it to zero. The relevant Russian and Indian ministries and financial organizations are in continuing dialogue on accepting RuPay and MIR Card within national payment infrastructures, as well as on the interaction of the unified payments interface and the Faster Payments System of the Bank of Russia. The Russian side invited Indian credit institutions to connect to the financial messaging system of Bank of Russia to facilitate faultless interbank transactions," Solodov said in his email.
Additionally, a rupee-rouble trade payment pact is being explored, which may settle international transactions using the rupee or even the yuan.
“All these options are on the table and are being discussed by the two governments, the Reserve Bank of India and the Bank of Russia," a senior Indian government official told Mint.