UPSC Prelims Practice Questions — Why is BRICS exploring cross-border payments?
Q1. Consider the following statements comparing the traditional correspondent banking route for cross-border payments with the rupee-based settlement arrangement permitted in India:
1. In a correspondent banking relationship, the same account is described as a 'nostro' account by the bank that holds funds with the foreign bank and as a 'vostro' account by the bank that provides the account facility.
2. Because each intermediary bank in the chain charges a fee and reconciles its positions only later, the originating bank finds it difficult to tell its customer in advance the total cost and the timing of the payment.
3. Special Rupee Vostro Accounts of correspondent banks may be opened by Authorised Dealer banks in India only after obtaining the prior approval of the Reserve Bank of India for each such account.
Which of the statements given above is/are correct?
- In a correspondent banking relationship, the same account is described as a 'nostro' account by the bank that holds funds with the foreign bank and as a 'vostro' account by the bank that provides the account facility.
- Because each intermediary bank in the chain charges a fee and reconciles its positions only later, the originating bank finds it difficult to tell its customer in advance the total cost and the timing of the payment.
- Special Rupee Vostro Accounts of correspondent banks may be opened by Authorised Dealer banks in India only after obtaining the prior approval of the Reserve Bank of India for each such account.
- A. 1 only
- B. 1 and 2 only
- C. 2 and 3 only
- D. 1, 2 and 3
Q2. The Roadmap for Enhancing Cross-Border Payments, built around nineteen 'building blocks' and aimed at making such payments faster, cheaper, more transparent and more inclusive, was endorsed in the first instance in October 2020 by which one of the following?
- A. The Board of Governors of the International Monetary Fund, meeting at its Annual Meetings
- B. The Committee on Payments and Market Infrastructures of the Bank for International Settlements
- C. The Finance Ministers and Central Bank Governors of the Group of Twenty (G20)
- D. The Finance Ministers and Central Bank Governors of the BRICS grouping
Q3. The progress made by the BRICS Payment Task Force in identifying pathways for greater interoperability of members' cross-border payments was welcomed, and finance ministers and central bank governors were tasked to carry the work forward, in which one of the following summit declarations?
- A. The Kazan Declaration adopted at the 16th BRICS Summit in 2024
- B. The Rio de Janeiro Declaration adopted at the 17th BRICS Summit in 2025
- C. The Johannesburg Declaration adopted at the 15th BRICS Summit in 2023
- D. The Fortaleza Declaration adopted at the 6th BRICS Summit in 2014
Q4. In the work of the BRICS Payment Task Force, the goal described as achieving 'greater interoperability of cross-border payments' among members is best understood as which one of the following?
- A. Creating a single centralised clearing house through which every intra-BRICS payment must compulsorily be routed and settled
- B. Requiring all member central banks to issue one common BRICS currency that alone may be used for settling intra-BRICS trade
- C. Obliging each member to route the entirety of its external payments exclusively through banks headquartered within BRICS countries
- D. Enabling the members' existing national payment and settlement arrangements to work with one another so that payments can pass between them
Q5. The 'Jaipur Consensus', an outcome of a ministerial meeting held under India's BRICS Chairship in 2026, refers to which one of the following?
- A. An agreement to establish a common BRICS currency unit for the settlement of intra-bloc merchandise trade
- B. A decision to study a BRICS Invoice Discounting Mechanism aimed at easing trade finance for smaller enterprises
- C. A framework for achieving interoperability among the central bank digital currencies issued by member countries
- D. A set of guidelines for local-currency infrastructure lending by the New Development Bank to its member states
Q6. With reference to meetings held in India under its BRICS Chairship in 2026, consider the following:
1. First Meeting of BRICS Sherpas and Sous-Sherpas — New Delhi, June 2026
2. Third Meeting of the BRICS Contact Group on Economic and Trade Issues — New Delhi, August 2026
3. 16th BRICS Trade Ministers' Meeting — Jaipur, Rajasthan
4. BRICS Finance Ministers and Central Bank Governors' Meeting — Jaipur, August 2026
Which of the above is/are correctly identified?
- First Meeting of BRICS Sherpas and Sous-Sherpas — New Delhi, June 2026
- Third Meeting of the BRICS Contact Group on Economic and Trade Issues — New Delhi, August 2026
- 16th BRICS Trade Ministers' Meeting — Jaipur, Rajasthan
- BRICS Finance Ministers and Central Bank Governors' Meeting — Jaipur, August 2026
- A. 1, 2 and 3
- B. 1 and 4 only
- C. 2, 3 and 4
- D. 3 and 4 only
Q7. The 'BRICS Cross-Border Payments Initiative', which India's Chairship carries forward to the New Delhi Summit, is best described as which one of the following?
- A. A treaty-based facility through which member central banks provide one another short-term liquidity support by means of a multilateral currency swap
- B. A mandate to members' finance ministries and central banks to continue work on pathways for greater interoperability of their payment arrangements
- C. A mechanism under which member banks extend local-currency credit lines to one another within the Interbank Cooperation Mechanism
- D. An arrangement under which the New Development Bank clears and settles intra-BRICS trade invoices in the local currencies of members
Q8. In the run-up to the BRICS Summit hosted by India, coordination of the Sherpa track — the channel through which the summit's overall agenda and outcome documents are negotiated — is handled on India's behalf by which one of the following?
- A. The Department of Economic Affairs in the Ministry of Finance, which anchors India's multilateral financial engagements
- B. The Department of Commerce in the Ministry of Commerce and Industry, which anchors India's multilateral trade engagements
- C. NITI Aayog, which anchors India's engagement with multilateral development institutions and think-tank networks
- D. The Ministry of External Affairs, which anchors India's participation in plurilateral and multilateral groupings
Q9. With reference to the Digital Rupee (e₹), which one of the following statements is correct?
- A. It is a digital form of the rupee that is itself legal tender, whereas UPI is a means of payment that moves money already held in bank accounts
- B. It is a payment interface that necessarily requires every transaction to be routed through a customer's commercial bank account, exactly as UPI does
- C. It is issued by scheduled commercial banks under licence from the central bank and is legal tender solely for the purpose of interbank settlement
- D. It entirely replaced physical currency as legal tender in the country from the date on which its retail pilot was launched
Q10. The BRICS Contingent Reserve Arrangement, which allows member central banks to draw short-term liquidity support from one another to cushion balance-of-payments stress, was established with an initial committed size of:
- A. US$ 50 billion
- B. US$ 75 billion
- C. US$ 100 billion
- D. US$ 200 billion
Q11. The mobilisation of resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies is the mandated function of which one of the following institutions?
- A. The BRICS Contingent Reserve Arrangement, which exclusively finances long-term infrastructure projects in all its member states
- B. The New Development Bank, headquartered in Shanghai, which has also admitted members from outside the BRICS grouping
- C. The BRICS Interbank Cooperation Mechanism, which alone underwrites every sovereign infrastructure loan raised within the grouping
- D. The Asian Infrastructure Investment Bank, the only multilateral lender permitted to finance projects in BRICS member countries
Q12. In the BRICS finance track, whose 2026 ministerial meeting at Jaipur was co-chaired by the Union Finance Minister and the Governor of the Reserve Bank of India, consider the following areas:
1. Cross-border payments
2. Financial technology
3. Contingent Reserve Arrangement
4. Competition policy and antitrust enforcement
Which of the above is/are correctly identified as workstreams of the BRICS central banks?
- Cross-border payments
- Financial technology
- Contingent Reserve Arrangement
- Competition policy and antitrust enforcement
- A. 1, 2 and 3
- B. 2 and 4 only
- C. 1, 3 and 4
- D. 3 and 4 only