India and Russia Collaborate on Payment and CBDC Interoperability

Overview of the India–Russia Payment and CBDC Interoperability Initiative

India and Russia have agreed to work towards interoperability between their national payment infrastructures and central bank digital currency (CBDC) systems, marking a significant step in bilateral financial cooperation. The understanding aims to facilitate smoother cross-border transactions, enhance settlement efficiency in local currencies, and explore technical pathways to link emerging digital currency platforms developed by the two central banks.

The development reflects a broader governmental focus on secure, technology-driven cross-border payments that reduce friction for trade, investment, tourism, and remittances. It comes against the backdrop of India’s ongoing pilot of the e-rupee and Russia’s phased rollout of the digital ruble, alongside earlier efforts to strengthen the use of national currencies in bilateral transactions.

While the agreement is at a framework and exploratory stage, it signals clear intent by both governments and their central banks to build compatible systems, align regulatory standards where needed, and create practical mechanisms for businesses and financial institutions to use these channels once they are operational and tested.

Background: India’s National Payments and CBDC Architecture

India has spent more than a decade building a layered digital payments ecosystem anchored by public digital infrastructure. The National Payments Corporation of India (NPCI) operates key retail payment systems that are now central to any discussion on interoperability with foreign platforms.

At the core of India’s domestic digital payments are systems such as:

• Unified Payments Interface (UPI) for real-time, bank-to-bank and wallet-based retail payments.
• RuPay, the domestic card scheme that supports debit, credit, and prepaid cards issued by Indian banks.
• Immediate Payment Service (IMPS) and National Electronic Toll Collection (NETC) as additional real-time and sector-specific payment services.

These systems sit on top of an evolving regulatory and supervisory framework overseen by the Reserve Bank of India (RBI), which has also been piloting the e-rupee in both wholesale and retail segments. The CBDC pilots focus on examining how digital legal tender can improve settlement efficiency, reduce costs, and support innovative financial products while maintaining monetary and financial stability.

India’s central bank has repeatedly stressed the importance of interoperability as a design principle, both between CBDC and existing payment systems and across borders where feasible. This India–Russia initiative aligns with that approach by exploring ways to make future CBDC platforms and national payment systems technically and operationally compatible.

Background: Russia’s Payment Systems and Digital Ruble

Russia has pursued parallel reforms to strengthen its domestic payment infrastructure and develop a sovereign digital currency. The Central Bank of the Russian Federation has been working on the digital ruble as a third form of money alongside cash and non-cash funds in bank accounts. Pilot projects have focused on retail use cases, smart contracts, and integration with banking and merchant ecosystems.

On the payments side, Russia operates systems such as:

• The Mir national payment card system for domestic card-based transactions.
• Faster and real-time credit transfer platforms operated under the oversight of the Russian central bank.
• Domestic messaging and settlement arrangements that complement international channels used by Russian banks.

The digital ruble design has emphasised central bank control, traceable transactions, and programmability features. These characteristics have direct relevance when considering interoperability with another CBDC such as India’s e-rupee, especially for cross-border use cases and settlement of trade in national currencies.

The Understanding on Interoperability: Scope and Intent

The India–Russia agreement focuses on two main pillars: interoperability of national payment systems and future interlinking of CBDC platforms. The understanding is intended to evolve into concrete technical and regulatory pathways after further joint work between the two central banks and other competent authorities.

On the payments side, the countries are examining the possibility of connecting or aligning their domestic schemes to support cross-border transactions. This can include exploring how systems akin to UPI and RuPay on the Indian side and Mir and domestic fast payment platforms on the Russian side might be technically bridged, either directly or through gateway arrangements involving participating banks and payment service providers.

On the CBDC side, the cooperation seeks to assess how the e-rupee and the digital ruble, both still in pilot or early rollout stages, could be designed or adapted to support cross-border settlements. This involves questions of interoperability standards, compliance requirements, transaction validation frameworks, data protection rules, and mechanisms for addressing disputes or system outages.

The broad intention, as indicated by official statements, is to reduce reliance on third-country currencies for transactions between Indian and Russian entities where possible and appropriate, without disrupting existing trade and payment practices that rely on conventional banking channels.

Official Statements and Government Positions

Formal communications issued following high-level bilateral talks have underscored the technical and economic focus of the initiative. Both sides have framed the development as a natural extension of earlier efforts to increase the use of national currencies in trade and to strengthen financial sector cooperation.

Indian and Russian officials have highlighted that any work on CBDC interoperability will proceed in accordance with domestic laws and regulatory mandates, including safeguards against money laundering, terrorism financing, and sanctions evasion. The initiative is being presented as an instrument to improve efficiency and transparency in legitimate cross-border transactions rather than circumvent oversight.

Indicative language used in joint communications has included references to “interoperability of national payment messaging systems,” “mutual acceptance of domestic card schemes,” and “prospects for linking central bank digital currencies for cross-border settlements,” with the specifics to be developed through technical working groups.

Implementation Pathways: How Interoperability Could Be Structured

The move from a broad understanding to concrete operational systems will require several layers of work. While detailed implementation plans have not been publicly finalised, there are established global models and frameworks that provide a likely template for the India–Russia initiative.

Payment System Interlinking

One track relates to linking national payment systems, particularly retail instant payment schemes and card networks. Possible implementation steps include:

• Creating technical gateways that can translate messages and transaction formats between UPI-like systems and Russian fast payment platforms.
• Enabling banks in each country to offer payment products that route cross-border transactions via domestic rails where feasible.
• Aligning or mapping Know Your Customer (KYC) and transaction monitoring requirements to ensure regulatory compliance at both ends.
• Establishing clear rules for chargebacks, dispute resolution, and settlement finality when transactions traverse interconnected systems.

This approach has already been adopted by India with other jurisdictions, where UPI has been linked to foreign real-time payment systems or QR-based payment solutions. The India–Russia engagement can draw on those experiences and adapt them to Russian payment infrastructures and legal requirements.

CBDC Interoperability and Cross-Border Use

The second track is more experimental, given that CBDCs are still under pilot or early implementation in both countries. Potential models that India and Russia may study include:

• Multi-CBDC arrangements, where two or more central banks participate in a shared platform or set of protocols for cross-border transactions.
• Bilateral CBDC corridors, in which e-rupee and digital ruble wallets or accounts can transact with each other under controlled conditions.
• Interlinked CBDC ledgers that rely on common standards for identity, messaging, and transaction validation, while each country retains its own core issuance and policy functions.

These models raise questions about foreign exchange conversion, the legal treatment of CBDC holdings across jurisdictions, caps on cross-border use, and access criteria for banks and payment institutions. Any India–Russia CBDC interoperability will therefore likely begin with limited-scope pilots, targeting specific use cases such as trade settlement between selected banks or corporates.

Regulatory, Security, and Compliance Considerations

Interoperable payment and CBDC systems involve more than technical integration. Regulatory alignment and operational risk management are central to the initiative’s success.

For the payment system component, both countries will have to address:

• Standards for customer and merchant due diligence when cross-border transactions are processed through domestic rails.
• Information-sharing arrangements between financial intelligence units and supervisory authorities.
• Cybersecurity and resilience protocols, including incident reporting and cooperative response in case of disruptions.
• Rules governing data localisation, privacy, and cross-border data flows associated with payment messages.

For the CBDC component, additional considerations arise. The RBI and the Central Bank of Russia must define acceptable parameters for cross-border CBDC use, such as:

• Whether only resident banks and financial institutions will access cross-border CBDC channels at the wholesale level.
• Whether individual retail users will be allowed to hold foreign CBDC or transact directly with it, and if so, under what caps or conditions.
• How to handle legal jurisdiction in the event of transaction disputes or system malfunction across national borders.
• How to coordinate macroprudential and capital flow management implications of CBDC-based cross-border payments.

Both central banks have reiterated their commitment to established international standards on anti-money laundering and countering the financing of terrorism. Any interoperable framework is expected to embed these safeguards by design.

Implications for Trade, Businesses, and Financial Institutions

From an administrative and commercial standpoint, enhanced interoperability between India’s and Russia’s payment and CBDC systems can offer several potential benefits if implemented effectively.

For trade, the use of interoperable national payment systems and, eventually, CBDCs may allow exporters and importers to settle transactions more quickly and at lower cost compared to some traditional correspondent banking routes. This can be particularly relevant for small and medium enterprises, which often face higher charges and longer settlement times when using conventional cross-border transfer mechanisms.

Financial institutions stand to gain from streamlined processes and reduced operational overhead associated with reconciliation and foreign exchange settlement in bilateral trade. Banks that participate in the interoperable frameworks may be able to offer new products, such as instant cross-border collections, automated trade settlement in local currencies, and integrated treasury solutions for corporates engaged in India–Russia commerce.

Retail customers, including tourists, students, and professionals, could benefit from the ability to use familiar payment applications and cards in the partner country once merchant acceptance grows. This would mirror arrangements already operational between India and other jurisdictions where Indian QR codes or card schemes are accepted internationally at selected outlets.

CBDC interoperability, once technologically and legally mature, could further improve settlement reliability and lower counterparty risk for cross-border flows. Smart contract features, if enabled, might support automated payment conditions tied to delivery milestones or compliance checks in trade transactions between Indian and Russian entities.

Impact on Government Services and Administrative Processes

Government agencies and public sector entities in both countries may also find administrative advantages in interoperable payment and CBDC systems. Public sector undertakings involved in energy, defence, infrastructure, and engineering exports or imports may gain more predictable settlement channels with reduced dependence on legacy systems.

On the Indian side, departments overseeing foreign trade, customs, and export promotion may be able to integrate interoperable payment information into their digital platforms. This could improve the timeliness and accuracy of export documentation, credit of incentives, and risk assessment in customs clearances where payments and logistics data need to be reconciled.

Digital payment linkages can also feed into the broader work on trade facilitation, including electronic invoicing, single-window clearance systems, and bank guarantee digitisation. The CBDC pilots, if extended to cross-border government or state-owned enterprise transactions, may provide live test cases for integrating programmable money with public procurement and contract management systems.

Administrative efficiency gains are likely to emerge gradually, as the systems stabilise and departments adapt legacy workflows to the new digital channels. Government stakeholders will need training, revised standard operating procedures, and updated risk management frameworks to fully leverage the interoperability arrangements.

Operational Challenges and Risk Management

Despite its potential, the India–Russia payment and CBDC interoperability initiative faces several operational and policy challenges. These do not negate the value of the cooperation but define the implementation risk landscape that authorities and institutions must manage.

Key challenges include:

• Technical complexity in integrating distinct national infrastructures that were designed independently, with different standards, message formats, and security architectures.
• Ensuring consistent user experience and dispute resolution mechanisms when transactions traverse multiple systems and regulatory regimes.
• Maintaining system resilience, especially cybersecurity defences, in an environment where cross-border interconnections can create new attack surfaces.
• Balancing innovation in CBDC cross-border use with macroeconomic and financial stability considerations, such as capital flow management and exchange rate dynamics.
• Aligning timelines for CBDC development in each country, as pilot maturity, legal frameworks, and technological readiness may differ.

Public communication and stakeholder outreach will be important as the initiative progresses. Banks, payment service providers, businesses, and user groups will require clarity on eligibility, processes, fees, dispute mechanisms, and regulatory requirements associated with the new channels.

Position within India’s Broader Cross-Border Payments Strategy

The India–Russia interoperability effort fits into a wider pattern of Indian initiatives to internationalise domestic digital payment platforms and prepare for cross-border CBDC use. India has already entered into arrangements with several countries to enable acceptance of RuPay cards, QR-based UPI payments, or linkages between real-time payment systems.

The RBI has participated in international working groups exploring multi-CBDC platforms and standard-setting for digital currencies. Domestically, the central bank has issued concept notes, consultation papers, and pilot frameworks on the e-rupee, explicitly referencing future possibilities of cross-border integration.

The India–Russia cooperation therefore adds another bilateral dimension to this evolving architecture. It demonstrates that India is pursuing a mix of plurilateral, regional, and bilateral pathways to build a more interconnected, efficient, and sovereign-friendly cross-border payment environment, in coordination with counterpart central banks and financial authorities.

Likely Phases and Next Steps

Although specific timelines remain subject to official decisions, the initiative is likely to unfold in stages. A plausible sequencing, based on global practice in similar projects, may include:

1. Technical and regulatory feasibility studies by RBI, the Central Bank of Russia, and relevant payment system operators.
2. Limited pilot projects for payment system interlinking, covering selected banks, corridors, and transaction types.
3. Progressive expansion of coverage to more financial institutions and sectors, subject to performance, security, and compliance assessments.
4. Experimental CBDC-based cross-border settlement pilots, initially at the wholesale level for specific trade or financial flows.
5. Evaluation and potential scale-up of CBDC interoperability features, depending on risk assessments, legal changes, and user acceptance.

Throughout these phases, India and Russia are expected to maintain close coordination not only between their central banks but also among ministries of finance, trade regulators, financial intelligence units, and standard-setting bodies. Such coordination will be crucial to ensure that technical integration is aligned with policy objectives and legal requirements on both sides.

Conclusion

The agreement between India and Russia to advance interoperability of national payment and CBDC systems represents a substantive step in bilateral financial cooperation, rooted in technology and regulatory coordination rather than rhetoric. It builds upon the digital public infrastructure developed by India and Russia’s own payment and digital ruble initiatives, while opening a structured path towards more efficient and secure cross-border transactions.

The initiative has potential to facilitate trade, reduce transaction costs, provide new tools for financial institutions, and modernise administrative processes in government and public sector bodies. At the same time, it demands careful management of regulatory, technological, and macroeconomic risks associated with linking critical financial infrastructures and experimenting with cross-border CBDC use.

As the technical working groups proceed and pilot projects begin to take shape, the practical contours of India–Russia payment and CBDC interoperability will become clearer. For now, the announcement signals a deliberate move by both countries to embed interoperability and digital innovation at the heart of their future financial connectivity.