Brics can expand local-currency trade, but payment integration may take a decade: Experts

Brics countries have significant scope to increase trade in local currencies and build more direct cross-border payment links, but creating a wider payment network across the grouping could take years because the biggest hurdles are regulatory, financial and political rather than technological, experts told Firstpost.

Dr Vikramjit Singh Sahney, Member of Parliament, Rajya Sabha, and a member of the Brics Business Council, said there is an urgent need to increase the use of local currencies for trade within the grouping, while acknowledging that the US dollar will continue to play a major role in global commerce.

“There is an urgent need for dedollarization of trade, at least to some extent. The entire global trade system cannot be substituted overnight and we will continue to depend on the dollar to a large degree,” Sahney told Firstpost.

“But among Brics countries, trade can certainly be transacted in local currencies through currency swap agreements,” he said.

Sahney said the recent West Asia crisis had highlighted the vulnerability of relying heavily on a single global currency, with movements in the dollar and its forward rates affecting the rupee and other trade currencies.

The case for greater local-currency settlement is also supported by previous arrangements involving India, he said.

“There used to be a rupee clearing arrangement between India and Russia, and an Asian Clearing Union mechanism involving India and Iran,” Sahney said.

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According to Sahney, India’s digital payments infrastructure provides another opportunity to deepen financial links across Brics.

“With India’s digitalisation leading the world with UPI already operational in many countries, including the UAE, there is tremendous, logical scope for settlement in local currencies. This can substantially augment intra-Brics trade,” he said.

The comments come as India, which is chairing Brics in 2026, seeks greater economic and financial cooperation among members, including stronger cross-border payment connectivity.

Professor Shashwat Alok of the Indian School of Business said linking domestic fast-payment systems could offer Brics members an additional channel for cross-border transactions without immediately attempting to construct an entirely new international payments architecture.

“The logic is sound. Linking domestic fast payment systems is far cheaper than constructing a parallel international messaging and settlement network, and it gives members a second rail at a time when dependence on a single payment architecture carries real geopolitical risk,” Alok told Firstpost.

“Diversification of payment infrastructure is a defensible objective in its own right,” he said.

Alok said the main challenge would not be connecting payment systems technically. It would be getting countries to agree on the regulatory and financial framework governing those transactions.

“The binding constraint is regulatory rather than technical,” Alok said.

He pointed to sanctions and anti-money laundering screening, settlement and liquidity in currencies that are not fully convertible, data localisation, and the allocation of fraud and exchange-rate risks as some of the issues that would need to be resolved.

“A common QR standard resolves none of this,” Alok said.

Currency swaps could support local-currency trade

One of the most immediate areas of cooperation could therefore be bilateral local-currency settlement supported by currency-swap arrangements.

Currency swaps can provide liquidity between participating currencies and help manage imbalances in trade. This could become particularly important for Brics because its members operate under different currency regimes and have varying levels of currency convertibility and financial-market liquidity.

The approach would also allow Brics countries to reduce the dollar component of some bilateral transactions without attempting to remove the dollar from global trade.

Sahney argued that there is already a basis for such arrangements in India’s previous experience with Russia and Iran.

The wider objective, he said, should be to make it easier for companies within Brics to trade directly using their own currencies.

UPI offers a possible model

India’s UPI system could provide one technological building block for such efforts, although payment connectivity alone would not resolve the wider financial and regulatory questions.

India has already connected UPI with payment systems in a number of countries, demonstrating that domestic instant-payment infrastructure can be extended across borders.

Alok cited the UPI-PayNow linkage with Singapore as an example of how such integration develops over time. The connection was announced in 2021, went live in February 2023 and was subsequently expanded.

The lesson, according to Alok, is that even bilateral payment integration requires time and coordination between regulators and financial institutions.

For Brics, the challenge would be considerably larger because the grouping brings together multiple currencies, legal systems and financial regulations.

Brics CBDC push

Against this backdrop, India is also pushing a proposal to link central bank digital currencies (CBDCs) across Brics countries to facilitate cross-border payments, Reuters reported on Thursday.

Reuters, citing people familiar with the discussions, reported that the proposal is expected to feature in the agenda of the Brics leaders summit in New Delhi on September 12 and 13.

The Reserve Bank of India had proposed linking the official digital currencies of Brics members for cross-border payments, Reuters reported in January.

The latest proposal builds on the 2025 Brics declaration in Rio de Janeiro, which called for greater interoperability among members’ payment systems to make cross-border transactions more efficient, Reuters reported.

The Reuters report also highlighted some of the obstacles facing the proposal, including limited adoption of CBDCs globally, political differences among Brics members and the need for currency-swap arrangements to manage trade imbalances.

Importantly, Reuters reported that India does not view the initiative as an attempt to replace the dollar. Instead, the focus is on making cross-border payments faster and easier.

That is broadly consistent with Sahney’s argument that dedollarisation within Brics would be incremental rather than an attempt to substitute the dollar overnight.

Europe shows why integration takes time

Alok said the experience of Europe shows how long it can take to build a cross-border payments framework even when participating economies operate within a much more closely integrated institutional system.

The Single Euro Payments Area, or SEPA, began with a European Central Bank initiative in 1999 and a European Commission regulation in 2001, followed by industry implementation from 2002. Migration was completed in 2014 for euro-area members and in 2016 for non-euro EU members.

That experience is particularly relevant because the European system developed within a common legal framework and, for euro-area members, a single currency.

Brics has neither a common currency nor an equivalent supranational regulatory framework.

It also faces the additional challenge of ensuring adequate liquidity and settlement arrangements between currencies that are traded and regulated differently.

“The realistic horizon is a decade of incremental bilateral links,” Alok said.

What Brics can realistically achieve

The more immediate opportunity for Brics may therefore lie in building payment connectivity incrementally rather than attempting to establish a single bloc-wide payment system at once.

Bilateral payment links, local-currency settlement and currency-swap arrangements could provide the initial building blocks. Greater interoperability could then follow as participating countries develop common standards and gain confidence in the system.

For businesses, the potential benefit is relatively straightforward: more options for settling cross-border trade without having every transaction depend on dollar-based infrastructure.

For Brics governments, the benefit is diversification. A wider range of payment channels could reduce dependence on any single payment architecture while giving members greater flexibility in how they settle trade.

But neither local-currency settlement nor CBDC links would, by themselves, displace the dollar from global commerce.

The more realistic path is a gradual expansion of bilateral and regional payment links, backed by regulatory coordination and currency-liquidity arrangements.