India intends to establish its own international financial messaging system similar to SWIFT (Society for Worldwide Interbank Financial Telecommunications), the channel used internationally to transmit funds and securities.
The proposal is a component of the government's larger plan to internationalise the Indian rupee, according to ET's sources. The system will facilitate bilateral commerce settlements in rupees.
According to officials with knowledge of the situation, a committee of expert financiers is currently evaluating potential solutions and is expected to present its findings to the government by August. The committee is comprised of representatives from the State Bank of India, the Bank of Baroda, the Bank of India, and the Central Bank of India, among others.
“One of the suggestions was to have an independent financing messaging system that can be used with countries where we have bilateral trade agreements,” said a bank official who did not wish to be identified. “This committee will now suggest measures on how to make this operational and what are the challenges. Accordingly, the issue will be taken up with other stakeholders, including the Reserve Bank of India (RBI).”
Another official stated that the committee will examine the Structured Financial Messaging System (SFMS), the RBI's current platform.
“We have to explore how we can scale this up,” he said.
The SFMS, modelled after SWIFT, can be utilised for secure communications within and between institutions. The RBI argued in its 2022 Vision Document for expanding the scope of the SFMS.
“The feasibility of providing membership/technology of Infinet to other jurisdictions shall be explored,” it noted. “Further, it shall be explored to expand the framework of SFMS to provide a domestic payment system platform to other jurisdictions. This could be expected to provide faster, convenient, and cost-effective direct payment channels with other jurisdictions.”
The Indian Financial Network (Infinet) is a membership-only Closed User Group network comprised of the Reserve Bank of India (RBI), member banks of the Centralised Payment System (CPS), and financial institutions. Through its member interface application, it provides financial messaging services to all RTGS (Real Time Gross Settlement) participants.
The government has been pressuring banks to conduct outreach programmes with the international trading community in order to promote trade through the use of special rupee vostro accounts (SRVAs).
To date, 20 institutions from 22 countries, including Bangladesh, Germany, and Russia, have opened 92 such accounts.
The Reserve Bank of India and the Central Bank of the United Arab Emirates signed an agreement earlier this month that will allow exporters and importers to invoice and pay in their respective domestic currencies, thereby facilitating the development of a bilateral foreign exchange market.
Comentarios