Reports that the Reserve Bank of India is exploring a proposal to link India’s Central Bank Digital Currency with those of its BRICS partners mark an important shift in India’s approach to digital money and cross-border payments. While the idea promises transparency and efficiency, it also carries strategic and geopolitical risks that New Delhi will need to weigh carefully.
What the RBI is proposing
According to recent reports, the Reserve Bank of India has suggested to the Centre that a proposal for connecting the CBDCs of BRICS countries be placed on the agenda of the 2026 BRICS summit to be hosted by India.
This idea builds on India’s push during its 2023 presidency of the G-20 to promote international cooperation and standard-setting in the digital assets space, especially around payments infrastructure.
The RBI’s consistent line on crypto and CBDCs
The RBI’s position has been internally consistent. It has been deeply sceptical of private cryptocurrencies, repeatedly warning of their volatility, fraud risks, and potential to erode household wealth, even going so far as to advocate an outright ban. At the same time, it has been an enthusiastic proponent of CBDCs.
This distinction rests on a clear logic. Private cryptocurrencies function largely as speculative assets, while CBDCs are state-backed digital representations of sovereign currency. CBDCs carry a sovereign guarantee, are non–interest bearing, and are designed primarily as a medium of exchange rather than an investment vehicle. This makes them inherently safer and less prone to speculative excess.
Why a domestic CBDC has limited appeal in India
For India, however, a retail CBDC offers limited incremental benefits. The country already has a highly efficient and widely adopted digital payments ecosystem in the form of UPI. UPI’s scale, ease of use, and network effects give it a formidable head start that a domestic CBDC is unlikely to overcome.
This is precisely why the RBI’s focus on international or cross-border use cases for CBDCs appears more pragmatic than pushing them as a domestic retail alternative.
The case for CBDCs in cross-border payments
Cross-border transactions are a known weak link in the global financial system. They are costly, slow, and frequently used for laundering black money. A blockchain-based CBDC framework could bring significant transparency to these flows.
Distributed ledgers create immutable transaction records and can be programmed to capture details about origin, destination, and purpose of payments. A BRICS-level agreement could go further by mandating links to national identity systems or tax authorities, tightening oversight without necessarily restricting legitimate trade.
Strategic advantages for India
A BRICS CBDC payments network could also help India navigate some difficult geopolitical constraints. Payments to countries such as Russia and Iran have become complicated because both are excluded from the SWIFT messaging system.
CBDC-based settlement mechanisms could provide an alternative channel for trade payments, reducing reliance on dollar-dominated systems and insulating transactions from certain sanctions-related disruptions.
The geopolitical risks of de-dollarisation
These same advantages also carry political costs. Any move by BRICS to reduce dependence on the US dollar is likely to provoke a response from Washington. Donald Trump has already warned of imposing additional tariffs on BRICS countries if they actively shift away from the dollar.
For India, which already faces high tariff barriers, the question is whether further incremental tariffs would materially worsen its trade position, or whether the long-term gains from more autonomous cross-border payment systems would outweigh the costs.
A cautious but logical next step
The RBI’s proposal reflects a broader strategic calculation: India has little to gain from replacing UPI at home, but potentially much to gain from reshaping cross-border payments. If designed carefully, a BRICS-linked CBDC system could improve transparency, reduce transaction frictions, and give India greater strategic flexibility.
At the same time, the risks — from geopolitical backlash to coordination challenges among diverse economies — are real. The success of such an initiative will depend not just on technology, but on diplomacy, regulatory alignment, and a clear-eyed assessment of trade-offs.
What to note for Prelims?
- CBDC: sovereign-backed digital currency issued by a central bank.
- RBI supports CBDCs but is critical of private cryptocurrencies.
- UPI limits the domestic utility of a retail CBDC in India.
- SWIFT exclusion affects payments to Russia and Iran.
What to note for Mains?
- Potential of CBDCs to reform cross-border payments.
- Link between digital currencies and de-dollarisation debates.
- Geopolitical implications of BRICS financial cooperation.
- Balancing financial innovation with strategic and trade risks.