1. In July 2024, the Reserve Bank of India (RBI) has joined Project Nexus. It is a multilateral initiative to enable instant cross-border retail payments by interlinking domestic Fast Payments Systems (FPSs).

1. A faster payment is a payment that enables real-time or near real-time availability of funds to the payee and is available nearly 24x7 in most supported payment schemes and systems across the globe.
2. Fast payments are facilitated by the faster payment scheme and faster payment systems (FPS).
3. An FPS is an electronic payments system which facilitates inter-bank fund transfer and sends confirmation of payment to the receiver and originator within a minute or less.
4. These payments are irrevocable – i.e. they cannot be reversed by the payer or the financial institution once the transaction has been successful.

2. The RBI is collaborating bilaterally with various countries to link India’s Fast Payments System (FPS) – UPI, with their respective FPSs for cross-border Person to Person (P2P) and Person to Merchant (P2M) payments.
3. A multilateral approach could further enhance the RBI’s efforts to expand the international reach of Indian payment systems.
4. In over 70 countries, domestic payments are instant and nearly free. Connecting these Instant Payment Systems (IPS) globally can enable cross-border payments within 60 seconds.

BIS-Led Project Nexus

1. Agreement: Bank for International Settlements (BIS) and central banks of India, Malaysia, Philippines, Singapore, and Thailand signed an agreement on June 30, 2024, in Basel, Switzerland.

1. Special Observer: Indonesia (will join in the future)

2. Background: BIS Innovation Hub (BISIH) Singapore Centre developed a blueprint in 2021. A working prototype was built in 2022, connecting Eurosystem’s TIPS, Malaysia’s RPP, and Singapore’s FAST payment systems.
3. Aim: To enhance cross-border payments by connecting multiple global domestic instant payment systems (IPS).

Benefits

Parameters	Current system	Nexus
Speed	Traditional payments are slow due to multiple banks and central banks' operating hours.	Payments can be completed in 60 seconds or less, operating 24/7/365.
Cost	High costs due to need for the correspondent accounts and larger number of banks.	Lower transaction fees and reduced administrative costs.
Access	Limited by financial inclusion and correspondent banking relationships.	Access through non-bank Payment Service Provider (PSPs) and simplified processes using proxies like mobile numbers.
Cross Border Payments	Currently, cross border payments mostly occur through banks.	With Nexus, anyone who can send/receive domestic payments should be able to do so cross-border payments.
Transparency	Variable fees and uncertainty about the final amount received.	Upfront (in advance) fee calculation and immediate payment status updates.
Safety, Security, and Resilience	Cross-border credit risk due to correspondent banking relationships.	Builds on existing risk management frameworks, reducing reliance on correspondent banking and mitigating cross-border credit risk.
Connectivity	Custom connections needed for each new country.	Centralised connections through a single platform.
Reach	Limited to bilateral agreements with individual countries.	Single connection reaches all countries on the Nexus network.
Collaboration	RBI collaborates bilaterally with countries like Bhutan, UAE, France, Sri Lanka, Mauritius.	Multilateral approach involving multiple countries simultaneously.

 

Bank for International Settlements (BIS) Established: 1930 Owned by 63 central banks, representing countries from around the world, representing about 95% of world GDP Head Office: Basel, Switzerland Representative Offices: Hong Kong SAR and Mexico City as well as Innovation Hub Centres around the world Innovation BIS 2025: Medium-term strategy leveraging technology and new collaboration channels for central banking in a fast-changing world. Basel Banking Accords are global rules set by the Basel Committee on Banking Supervision (BCBS) and it operates under BIS in Basel, Switzerland, providing guidelines for best practices in banking. Services to Central Banks: Dialogue and Cooperation: Provides a forum for broad international cooperation. Innovation and Knowledge-Sharing: Offers a platform for responsible innovation. Policy Analysis: Provides in-depth analysis and insights on core policy issues. Financial Services: Delivers sound and competitive financial services.

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