RBI Plans To Take Financial Messaging System SWIFT’s Homegrown Alternative SFMS Global

The Reserve Bank of India (RBI) will look to scale up Structured Financial Messaging Solution (SFMS), its homegrown alternative to messaging system SWIFT, as part of its broader goalposts for the year 2025. 

The SFMS is backed by the Indian Financial Network (INFINET) which is essentially a closed user group network that includes the RBI, member banks of the centralised payment systems (CPS)  and other financial institutions. 

“The feasibility of providing membership/technology of INFINET to other jurisdictions shall be explored. Further, it shall be explored to expand the framework of SFMS to provide a domestic payment system platform to other jurisdictions,” the RBI said in its ‘Payments Vision 2025’ document.

The RBI said that the SFMS could provide faster, convenient and cost-effective direct payment channels with other jurisdictions.

SWIFT is a global member-owned platform that provides financial messaging services and is used by over 11,000 banks and other organisations.

The announcement to take the SFMS global comes at a time when SWIFT has been grappling with the aftermath of banning Russia from the global payments messaging system over its invasion of Ukraine. The Belgium-based organisation has banned seven Russian banks from the system, a move that has left one of the major exporters of oil out of the financial system. India appears to have seized this opportunity to unveil its new alternative.

Despite the sanctions on Russia, a major chunk of global economies still import oil from Russia. In the absence of SWIFT, Russia has been trying to work out different arrangements with importers to resume economic exchange. Earlier last week, it was reported that Indian and Russian authorities are looking to revive the Rupee-Rouble payment mechanism.

The announcement is part of a slew of initiatives outlined by the RBI in its vision document 2025 for the internationalisation of its products. The central bank also plans to ramp up the global outreach of RTGS, NEFT and RuPay cards. The RBI also plans to shore up UPI infrastructure which has won rave reviews from across the globe. 

The document also said that the RBI would seek inclusion of the Indian Rupee in the Continuous Linked Settlement (CLS), which provides protection for cross-currency settlement in 18 currencies. 

“Internationalisation of domestic currency is gaining importance in recent times with many countries pursuing efforts in this direction. With excellent FMIs (financial market infrastructures) already in place and deepening of forex and financial markets, a mechanism for international INR settlement through CLS Bank would help increase global acceptance of INR. RBI shall initiate dialogue for including INR as a currency in CLS,” the document said.

While India has been pushing for more ‘internationalisation’ of its products, the RBI said it will also explore options to ring-fence the domestic payment systems, including the need to mandate domestic processing of payment transactions.

The RBI’s ‘Payments Vision 2025’ aims to increase the number of digital payment transactions by more than 3X by 2025 and targets an annualised growth of 20% for Immediate Payment Service (IMPS) and National Electronic Funds Transfer (NEFT).