RBI flags geopolitical tensions as key risk to cross-border payments

The Reserve Bank of India (RBI) has highlighted geopolitical tensions as a key risk for cross-border payments and financial flows, citing the centralised nature of global financial infrastructure and dependence on a few major settlement currencies. 

“Sanctions, restrictions on financial systems or currencies, and other operational barriers can disrupt markets and access. Affected countries may respond by developing bilateral or multilateral alternatives to safeguard against such disruptions,” the central bank cautioned in its “Payments System Report”, which has presented an overview of the landscape of payment systems in India. 

On the one hand, the RBI has said that cross-border payments are being transformed by technological innovation, greater investment, payment across jurisdictions, and rising remittances from work-related migration. On other hand, it has cautioned that persistent friction, including long transaction chains with multiple intermediaries in certain corridors, lack of interoperability due to fragmented data standards, and the complex processing of compliance checks and legacy platforms in technology affect their efficiency and cost-effectiveness, particularly for individuals and small businesses.

 

 

On its part, the RBI has been pursuing measures to enhance cross-border payments by encouraging various modes of collaboration with other countries, including the interlinking of Unified Payments Interface (UPI) on a bilateral and multilateral basis with fast-payment systems (FPS) of other countries for personal remittances and the acceptance of FPS via QR codes at merchant locations abroad. 

The RBI and the Monetary Authority of Singapore (MAS) have operationalised the linking of their respective FPS — UPI and PayNow — respectively in 2023. Also, the acceptance of India’s UPI apps via the QR code has been operationalised in Bhutan, France, Mauritius, Nepal, Singapore, Singapore, the United Arab Emirates, and Qatar. This enables Indian travellers to these countries to make payments to merchants using their UPI apps. 

Additionally, India, along with Malaysia, the Philippines, Singapore and Thailand, has joined “Project Nexus”, a multilateral international initiative to enable instant cross-border retail payments by interlinking domestic FPSs. 

The report has highlighted that India remains the world’s largest recipient of foreign remittances, with a record inflow of $137.7 billion in 2024 — more than double that of Mexico, the second-highest recipient at $67.6 billion. This is driven by India’s large diaspora, which continues to play a role in strengthening foreign-exchange reserves and supporting economic stability. 

Additionally, according to the report, India has emerged as a focal point due to its significant variance in remittance costs across different corridors. The corridor from Kuwait to India is the most cost-effective — 2.10 per cent (Q4: 2024) — which is well below the United Nations Sustainable Development Goal (SDG) benchmark. 

The SDG and the G20 have indicated a target of 3 per cent for the global average remittance cost to be reached by 2030, while also committing themselves to ensuring that in all corridors, remittances can be transferred for 5 per cent or less. 

Meanwhile, the report noted that as of June, there were over 1.17 billion outstanding cards in India, comprising 111.2 million credit cards and over 1 billion debit cards. 

While credit-card transactions have seen a sharp rise in recent years, those of the debit card have declined since 2019 in both volume and value. 

According to the report, credit cards and debit cards are showing different usage patterns. 

“While credit cards are being increasingly used for online purchases and credit access, debit cards are mostly being used for cash withdrawals and basic transactions. Both instruments, however, face growing competition from digital alternatives,” the report said. 

Additionally, while private banks continue to dominate the credit-card segment, focusing on digital and co-branded offers, with their market share rising from 65.8 per cent in June 2020 to 70.8 per cent in June 2025, the share of public-sector banks has increased slightly, from 22.5 per cent to 24.1 per cent during the same period. The share of foreign banks saw a steep decline, falling from 11.7 per cent to 4.1 per cent. 

Small finance banks had issued one million cards by June. 

Separately, the report noted that the Payments Regulatory Board (PRB), which replaced the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), under the chairmanship of the governor of the RBI, is the designated authority for regulation and supervision of the payment systems in India. 

The report highlights that the value of payment transactions in India has grown from ₹1,775 trillion to ₹2,830 trillion in CY24, and almost the entire growth in payments is attributable to digital payments. 

Key findings

• Users prefer UPI for small to medium value transactions
• IMPS opted for medium to large value transactions
• In 2020-25, share of foreign banks in credit cards declined from 11.7 per cent to 4.1 per cent
• Credit cards being increasingly used for online purchases
• Debit cards being used for cash withdrawals and basic transactions