Global SFMS: India’s Indigenous Alternative to SWIFT Takes Shape as RBI Pushes Rupee-Based Cross-Border Payments

India is gradually building the infrastructure required for a more sovereign cross-border payments architecture, with the Reserve Bank of India seeking to extend the country’s domestic Structured Financial Messaging System, or SFMS, beyond national borders through a proposed Global SFMS Hub.

The initiative forms part of a broader effort to internationalise the Indian rupee, reduce excessive dependence on external financial infrastructure and create additional channels for settling trade and remittance transactions in local currencies. While SFMS already functions as a domestic financial-messaging standard within India, the proposed global architecture would allow participating foreign financial systems to connect with Indian infrastructure for cross-border payment messaging.

The development does not mean that India has created a complete global replacement for SWIFT. Instead, the RBI is working towards an alternative framework that could support bilateral and multilateral payment corridors, particularly with countries interested in local-currency settlement and greater interoperability between national payment systems.

SFMS Is India’s Domestic Financial-Messaging System

The Structured Financial Messaging System was developed specifically for India’s banking and financial sector. It was originally created by the Institute for Development and Research in Banking Technology, an institution established by the Reserve Bank of India, and became part of the country’s core financial infrastructure.

SFMS provides a secure and standardised method through which banks and financial institutions exchange payment-related messages. It operates over INFINET, the Indian Financial Network, and supports communication associated with major domestic payment systems including RTGS and NEFT.

The role of SFMS is comparable in principle to that of SWIFT. Both provide secure financial messaging between institutions. They do not themselves represent the final settlement of money, which occurs through central-bank systems, correspondent accounts or other settlement mechanisms.

This distinction is important because the proposed Global SFMS architecture is primarily intended to provide the messaging layer required for cross-border payments while working alongside settlement infrastructure such as RTGS and local-currency banking arrangements.

RBI Has Proposed a Global SFMS Hub

The Reserve Bank of India has outlined a framework under which SFMS could be extended internationally through a Global SFMS Hub.

Under this approach, participating countries could connect their domestic financial-messaging systems with the Indian hub and exchange cross-border payment instructions without relying exclusively on SWIFT.

The RBI has linked the proposal with the wider internationalisation of Indian payment infrastructure and the rupee. Such a system could allow participating financial institutions to exchange messages for transactions denominated in rupees or in the local currencies of partner countries.

The model is based on interoperability rather than replacing each country’s domestic payment system. Participating states could continue operating their own banking infrastructure while establishing secure links with the Global SFMS platform for cross-border transactions.

International RTGS Could Form the Settlement Layer

The RBI’s Inter-Departmental Group on the Internationalisation of the Indian Rupee has also examined the possibility of developing an international RTGS architecture based on SFMS.

Under such a framework, participating foreign banks could route payment instructions through authorised institutions connected to an international SFMS hub. Settlement could then take place through accounts maintained in Indian rupees or other agreed currencies.

This model would bring messaging and settlement closer together while retaining central-bank oversight of the financial infrastructure.

The proposal also reflects the importance of ensuring that cross-border payments do not depend solely on international correspondent banking chains, which can increase transaction costs and settlement times.

An international RTGS framework linked to SFMS could potentially provide a more direct payment corridor between India and participating partner countries.

Reducing Dependence on SWIFT

The RBI has identified excessive dependence on external financial-messaging infrastructure as an area where greater domestic capability could improve resilience.

SWIFT remains the dominant global financial-messaging network and connects thousands of banks and financial institutions across more than 200 countries and territories. Indian banks will continue to depend heavily on SWIFT for global transactions because of its enormous international network.

The objective of Global SFMS is therefore not to disconnect India from SWIFT, but to provide an additional channel for transactions where bilateral or regional payment arrangements exist.

Such diversification can reduce operational dependence on a single international messaging network and give participating countries greater control over selected cross-border payment flows.

This approach also allows India to expand the international use of its own financial infrastructure without disrupting existing relationships with the global banking system.

India–UAE Cooperation Provides an Early Model

India’s cooperation with the United Arab Emirates provides one of the clearest examples of how the broader strategy could work.

The Reserve Bank of India and the Central Bank of the UAE agreed in 2023 to explore linking India’s SFMS with the UAE’s financial-messaging system. The agreement was part of a broader package covering local-currency settlement and interoperability between national payment systems.

The two countries also agreed to work towards linking India’s Unified Payments Interface with the UAE Instant Payment Platform, while RuPay was to be connected with the UAE’s domestic card-switching infrastructure.

This approach demonstrates how different layers of financial infrastructure can be connected simultaneously.

SFMS provides the bank-to-bank financial-messaging layer, while UPI supports retail transactions and remittances. Local-currency settlement arrangements provide the mechanism through which trade can be invoiced and settled directly in rupees and dirhams.

Together, these systems form the basis of a more integrated bilateral payment architecture.

Local-Currency Settlement Supports Rupee Internationalisation

The proposed Global SFMS framework is closely connected with India’s efforts to expand the use of the rupee in international commerce.

In 2022, the RBI introduced a mechanism allowing international trade to be invoiced and settled in Indian rupees through Special Rupee Vostro Accounts maintained with authorised Indian banks.

India has subsequently developed local-currency settlement arrangements with several partner countries, including the UAE, Indonesia, Maldives and Mauritius.

The objective is to reduce the need to route every trade transaction through a third currency such as the US dollar.

Direct settlement between the rupee and partner currencies can reduce foreign-exchange conversion costs and simplify certain categories of bilateral trade.

A Global SFMS architecture could provide the secure messaging infrastructure required to support these settlement arrangements on a larger scale.

Financial Infrastructure Is Essential for Rupee Internationalisation

The wider international use of a currency depends on more than trade agreements or government policy.

Banks and businesses require infrastructure that allows them to invoice, transfer, settle and hold the currency efficiently.

The global dominance of the US dollar is supported by deep financial markets, extensive correspondent banking relationships, large pools of liquidity and highly developed international payment infrastructure.

India therefore needs to strengthen the institutional and technological framework surrounding the rupee if it wants the currency to play a larger international role.

Global SFMS could contribute to that process by providing participating banks with an alternative messaging channel linked directly with Indian settlement infrastructure.

However, the success of such a system will depend on several factors beyond technology, including foreign-exchange liquidity, regulatory cooperation and the willingness of foreign banks to maintain rupee balances.

RTGS Provides a Strong Domestic Foundation

India already possesses a sophisticated domestic settlement infrastructure through its Real Time Gross Settlement system.

RTGS allows large-value payments to be settled individually and in real time using central-bank money. India’s RTGS system also operates continuously, providing round-the-clock settlement capability.

The system uses ISO 20022 financial-messaging standards, which have become increasingly important across global payment networks.

Adoption of an internationally recognised messaging standard improves the possibility of connecting Indian systems with overseas payment infrastructure.

The development of a Global SFMS Hub can therefore build upon an existing settlement system rather than requiring India to create an entirely new cross-border architecture from the beginning.

INFINET Provides the Banking Communications Backbone

SFMS operates within a wider financial infrastructure that includes the Indian Financial Network, or INFINET.

INFINET provides secure communications connectivity for banks and financial institutions and carries critical payment applications such as RTGS, NEFT and other RBI systems.

India has continued modernising this network to improve resilience, bandwidth, cybersecurity and operational reliability.

This underlying communications layer is an important component of financial sovereignty because secure messaging systems require a dependable network through which banks can communicate.

International expansion of SFMS would place even greater emphasis on cybersecurity, authentication, encryption and operational resilience because the network would connect institutions operating across different regulatory jurisdictions.

Global SFMS and UPI Perform Different Roles

India’s international payment strategy extends across several different layers of the financial system.

UPI is primarily an instant retail-payment system used by consumers and businesses. Its international expansion allows users to make merchant payments or transfer relatively small amounts across linked payment networks.

SFMS operates at the institutional level and is designed for secure financial messaging between banks and other regulated financial entities.

The distinction becomes important when assessing India’s wider payments strategy.

UPI can support retail payments, tourism transactions and remittances, while SFMS and RTGS can support larger banking and trade settlements.

A comprehensive cross-border payment architecture therefore requires both retail and institutional systems rather than relying on a single platform.

Interoperability Is Becoming the Central Strategy

India’s approach to international payments increasingly favours interoperability between national systems.

Instead of attempting to replace every foreign payment platform with an Indian system, India has pursued arrangements in which existing networks are connected through common technical and regulatory frameworks.

This philosophy is visible in UPI linkages with overseas fast-payment systems and in RBI’s participation in international initiatives designed to connect national instant-payment networks.

The same concept can be applied to financial messaging.

Global SFMS could provide a common connection point through which participating countries exchange payment instructions while retaining control over their domestic banking infrastructure.

Such a model can reduce the cost and complexity associated with building individual bilateral connections between every pair of participating countries.

BRICS Could Provide a Future Multilateral Opportunity

The Global SFMS concept also has potential relevance to ongoing discussions within BRICS on national currencies and cross-border payment interoperability.

BRICS members have increasingly examined ways to reduce transaction costs and improve payment connectivity without creating dependence on a single external financial network.

India already possesses several systems that could contribute to such an architecture, including UPI, RTGS, SFMS and RuPay, alongside its framework for settling trade in local currencies.

A future BRICS payment arrangement would not necessarily require the creation of one entirely new supranational network.

An alternative model could involve connecting the domestic systems of participating countries while allowing each member to retain control over its own financial infrastructure.

Global SFMS could potentially form part of India’s contribution to such an interoperable arrangement.

However, no formal decision has been announced making SFMS a BRICS-wide financial-messaging network, and any such arrangement would require detailed agreements between participating central banks.

Network Scale Remains SWIFT’s Biggest Advantage

The greatest challenge for Global SFMS will not necessarily be technological.

SWIFT’s strength lies in the scale of the network it has built over several decades.

Thousands of financial institutions already use SWIFT, while banks around the world have developed compliance systems, operational procedures and correspondent relationships around the network.

A new international messaging system must therefore establish sufficient commercial and institutional participation to become useful.

Foreign banks will need reasons to connect, while regulators must be confident that cybersecurity, anti-money-laundering safeguards, data standards and settlement arrangements meet international requirements.

Global SFMS can provide the technological foundation, but building a large international network around it will require gradual expansion through bilateral and regional arrangements.

Currency Liquidity Will Be Equally Important

The international use of SFMS will also depend on the availability and usefulness of rupee liquidity outside India.

A trading partner that receives more rupees than it spends must have productive options for deploying those balances.

Foreign holders may need access to Indian government securities, corporate debt, deposits or other financial instruments.

Without sufficient investment options, surplus rupee balances could reduce the attractiveness of local-currency settlement.

The RBI has already identified this issue while examining the internationalisation of the rupee.

The development of deeper and more accessible rupee financial markets will therefore be important for the long-term success of cross-border settlement arrangements.

Foreign-Exchange Markets Will Need to Develop

Direct currency conversion presents another challenge.

Many emerging-market currency pairs do not have deep and liquid foreign-exchange markets.

Trade between two countries may therefore continue to use the US dollar as an intermediate reference when calculating exchange rates, even when the final settlement occurs in local currencies.

As transaction volumes increase, direct currency markets can gradually develop.

This process will take time and will depend on trade flows, banking participation and the willingness of companies to invoice transactions directly in rupees and partner currencies.

Global SFMS can facilitate the movement of payment instructions, but it cannot by itself create currency liquidity.

ISO 20022 Improves Global Compatibility

India’s use of the ISO 20022 financial-messaging standard strengthens the technical foundation for future cross-border connectivity.

ISO 20022 provides a structured format for transmitting detailed financial information and is increasingly being adopted by central banks and international payment networks.

Using common standards makes it easier for different payment systems to exchange information.

This means that an Indian-controlled financial-messaging system does not have to operate as an isolated proprietary network.

Global SFMS can remain part of India’s sovereign financial infrastructure while still using internationally recognised messaging standards that facilitate interoperability with foreign systems.

Cybersecurity Will Be Critical

The credibility of any international financial-messaging network depends heavily on cybersecurity and operational reliability.

Financial networks process transactions involving large sums of money and are therefore attractive targets for cybercrime and sophisticated attacks.

International expansion would require strong authentication, encryption, access controls, network segmentation and continuous monitoring.

Participating countries would also need common standards for cybersecurity, incident reporting and operational recovery.

India’s existing financial networks already operate within highly controlled banking environments, but international connectivity would substantially increase the complexity of the threat environment.

Trust in the security and reliability of Global SFMS will therefore be essential for attracting foreign banks and central banks.

Global SFMS Would Complement SWIFT

The most accurate way to describe Global SFMS is as an additional sovereign channel for cross-border financial messaging rather than an immediate replacement for SWIFT.

Indian banks can continue using SWIFT for global transactions while employing SFMS-linked corridors where bilateral or multilateral arrangements have been established.

This approach provides flexibility and resilience without disrupting access to the existing international financial system.

Over time, a larger share of trade with participating countries could move through interconnected national systems as technical standards, banking relationships and local-currency markets deepen.

The development is therefore evolutionary rather than disruptive.

India Is Building an Integrated Financial Technology Stack

Global SFMS forms part of a much broader domestic financial infrastructure developed by India over the past two decades.

UPI supports instant retail payments, while RuPay provides an indigenous card network. RTGS handles high-value settlement, NEFT supports nationwide electronic fund transfers, SFMS provides secure financial messaging and INFINET connects financial institutions through a dedicated communications network.

Special Rupee Vostro Accounts provide an additional mechanism for settling international trade in Indian currency.

Together, these systems give India increasing control over the infrastructure through which domestic and selected international payments are processed.

Extending SFMS internationally would add another component to this architecture by providing a sovereign financial-messaging option for cross-border transactions.

India’s Cross-Border Payments Architecture Is Entering a New Phase

India has already demonstrated through UPI that domestically developed financial infrastructure can achieve very large scale and eventually be connected with overseas payment systems.

Global SFMS represents the institutional banking equivalent of that broader strategy.

Unlike UPI, SFMS operates largely outside public view because its principal users are banks and financial institutions. Its strategic importance, however, can be considerable because secure financial messaging forms one of the foundations of international trade and banking.

The RBI’s proposal for a Global SFMS Hub indicates that India now intends to extend this capability beyond the domestic banking system.

The project could provide partner countries with an alternative channel for financial messaging linked to rupee and local-currency settlement arrangements while complementing the existing international banking network.

Global SFMS should therefore not yet be described as a replacement for SWIFT. It represents a developing Indian alternative that could gradually reduce dependence on SWIFT for selected bilateral and regional transactions.

Its long-term importance will depend on the number of participating countries, the depth of local-currency markets, regulatory cooperation and the ability of Indian financial infrastructure to provide secure and reliable cross-border settlement.

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