India-Russia-China Explore Alternative to SWIFT Payment Mechanism

NEW DELHI: India, Russia and China are exploring an alternative to the US-dominated SWIFT (Society for Worldwide Interbank Financial Telecommunication) payment mechanism in a bid to smoothen trade with countries facing American sanctions, people aware of the development said.

Russia’s financial messaging system SPFS will be linked with the Chinese cross-border interbank payment system CIPS. While India still does not have a domestic financial messaging system, it plans to link the Central Bank of Russia’s platform with a service that is under development, the persons cited earlier told ET.

The new system is expected to work as a “gateway” model when messages on payments are transcoded in accordance with a certain financial system. India stopped importing oil from Iran after waiver for such imports was not extended by the US in May this year.

This proposed alternative to the SWIFT financial payment mechanism could be on the agenda of BRICS Summit in Brasilia, according to sources.

BRICS nations are separately exploring trade among themselves in national currencies, some officials said, requesting not to be named. ET had reported in July that to bypass the threat of US sanctions, India had earlier decided to pay in euros for defence equipment purchased from Russia. India and Russia have also been trading through rupee-rouble mechanism in the backdrop of US sanctions against Russia.

Russia began development of SPFS in 2014 amid Washington’s threat to disconnect the country from SWIFT. The first transaction on the SPFS network involving a non-bank enterprise was done in December 2017.

“We have an opportunity to connect both foreign banks and foreign legal entities to the SPFS. Today, about 400 users are participating in the system. Agreements have already been concluded with eight foreign banks and 34 legal entities,” according to Alla Bakina, the director of the Bank of Russia’s national payment system.

Bakina explained that traffic through the system has been growing and now accounts for around 15% of all internal traffic, up from 10-11% last year.

The EAEU (Eurasian Economic Union) countries are currently working with the Bank of Russia on technical options for connecting to the SPFS. Iran, which has officially joined the Russia-led free-trade zone (EAEU) this month, also seeks to develop a joint alternative to SWIFT. Last year, SWIFT cut off Iranian banks from its messaging system.

Source: ET

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