Discuss the significance of a BRICS cross-border payments mechanism for reducing dollar dependence in intra-bloc trade. What challenges does India face in operationalising this as BRICS chair?

Payments between BRICS members are still routed through correspondent banks in a dominant third currency, mainly the US dollar. With intra-BRICS merchandise exports at about USD 1.17 trillion in 2024, over thirteen times the 2003 level [2], a dedicated settlement mechanism has moved from rhetoric to a working agenda under India's 2026 chairship [1].

Significance for reducing dollar dependence

• Lower cost and faster settlement: direct national-currency settlement strips out intermediary banks, conversion spreads and fees. The 1st BRICS Finance Ministers and Central Bank Governors' Meeting (12 August 2026) released a Technical Report on a BRICS Cross-Border Payments System for cheaper, safer, more transparent payments [1].
• Resilience: reduced exposure to dollar-liquidity squeezes and to the disruption of correspondent channels by sanctions.
• Rupee internationalisation: scale for INR trade settlement and Special Rupee Vostro Accounts, a stated RBI objective [3].
• Technology, not a new currency: interlinking fast payment systems and CBDCs such as the e₹ [4] delivers interoperability without a single BRICS currency — the logic BIS Project Nexus, in which India participates, already demonstrates [5].

Challenges before India

• Asymmetry within the bloc: China's economic weight risks replacing dollar dependence with renminbi dependence, unhelpful given India's large trade deficit with China.
• Currency convertibility: the RBI's Inter-Departmental Group flagged shallow INR markets and limited convertibility [3]; persistent bilateral surpluses leave partners holding unusable balances.
• Strategic balancing: India must avoid signalling a de-dollarisation bloc that invites tariff or secondary-sanction pressure from Western partners.
• Institutional heterogeneity: ten members with divergent AML/KYC rules, data-localisation norms and uneven CBDC maturity, in a consensus body with no binding enforcement.

The mechanism is best read not as an assault on the dollar but as de-risking — adding a parallel rail for trade that is already large. India should therefore push incremental, standards-based interoperability with strong safeguards, converting its chairship into a durable Global South public good consistent with its own strategic autonomy.