MUMBAI: The Reserve Bank has flagged geopolitical tension as a key risk to cross-border payments and financial flows, citing the centralised nature of global financial infrastructure and dependence on a few major settlement currencies and has warned that these risks could disrupt global payment systems impacting payments and money flows.
The monetary authority has been pursuing measures to enhance cross-border payments by encouraging collaboration with other countries, including interlinking of UPI on bilateral and multilateral bases.
“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 RBI said in its latest Payments System Report for the first half of 2025, issued Thursday.
While the report notes that cross-border payments are undergoing a transformation driven by technological innovations, greater investment and payment flows across jurisdictions, and rising remittances from work-related migration, it cautioned that persistent frictions, including long transaction chains with multiple intermediaries, lack of interoperability due to fragmented data standards, complex processing of compliance checks and legacy technology platforms, continue to affect efficiency and cost-effectiveness, particularly for individuals and small businesses.
It can be noted that the RBI has been pursuing measures to enhance cross-border payments by encouraging collaboration with other countries, including interlinking of UPI on bilateral and multilateral bases with the fast payment systems (FPSs) for personal remittances and enabling acceptance of FPS via QR codes at merchant locations abroad.
Accordingly, the RBI and the Monetary Authority of Singapore operationalised the linkage of their respective FPSs—UPI and PayNow--in 2023. Acceptance of UPI app via QR codes has also been operationalised in Bhutan, France, Mauritius, Nepal, Singapore, the UAE and Qatar, enabling Indian travellers to make payments to merchants abroad 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 also highlighted that India remains the world’s largest recipient of 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 growth is driven by the large diaspora which continues to play a vital role in strengthening foreign exchange reserves and supporting economic stability. India has also emerged as a focal point due to significant variance in remittance costs across different corridors.
The corridor from Kuwait to India was notably the most cost-effective at 2.10% in Q4 2024, well below the UN sustainable development goal (SDG) benchmark. The SDG and the G20 have targeted a global average remittance cost of 3 percent by 2030, with a commitment to ensure that all corridors enable transfers for 5 percent or less.
As of June 2025, there were over 1.17 billion outstanding cards in the country, comprising 111.2 million credit cards and over 1 billion debit cards. While credit card transactions have risen sharply in recent years, debit card transactions have declined since 2019 in both volume and value.
According to the RBI report, credit and debit cards show divergent 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. While private sector banks continue to dominate the credit card segment, with their market share rising from 65.8% in June 2020 to 70.8 percent in June 2025, the share of public sector banks also increased slightly from 22.5 percent to 24.1 percent. However, the share of foreign banks fell steeply from 11.7 percent to 4.1 percent as their outstanding credit cards dropped from 6.7 million to 4.5 million. Small finance banks had issued 1 million cards by June 2025.
