Understanding the RBI's Draft Guidelines for Faster Cross-Border Payments

The Need for Speed in Cross-Border Payments

A recent draft circular from the Reserve Bank of India outlines guidelines to facilitate faster cross-border inward payments. It identifies delays at the beneficiary leg as a significant factor affecting the speed of these payments.

To streamline processes, the draft circular proposes that beneficiary banks:

1. Inform their customers immediately upon receiving an inward message. Messages received after operating hours should be communicated at the start of the next business day.

2. Carry out reconciliation and confirmation of credit in their Nostro accounts on a near real-time basis or at periodic intervals not exceeding 30 minutes.

3. Credit inward payments received during FX market hours within the same business day and those received after, on the next business day.

4. Implement a straight-through process for crediting inward payments to individuals.

5. Provide a digital interface to customers to facilitate FX transactions.

   
   

Challenges Identified by SWIFT

In September 2025, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) published a paper that identifies several challenges in the last mile of payment processing outside the SWIFT network. These challenges contribute to delays in cross-border payments:

1. Regulatory reporting requirements, such as the need for beneficiaries to report the purpose of payment before funds can be credited, can cause delays.

2. Payments are often held up by recipient institutions until exchange control processes are completed.

3. The absence of 24x7 real-time payment systems results in payments being held for overnight processing if they arrive after hours.

4. Local payment formatting requirements, incomplete or missing data in payment messages, and technological constraints necessitate manual processing.

   
   

SWIFT emphasizes that adopting the richer data capability in ISO 20022 will allow for better information handling and is essential for achieving higher straight-through processing (STP) rates.

Gaps in the RBI's Draft Guidelines

The RBI's draft guidelines do not fully address the issues identified by SWIFT, such as complexities arising from local regulatory reporting, exchange control, or the lack of 24x7 real-time solutions for cross-border payments. However, there is some movement towards automation, particularly STP for individual payees.

Local Reporting Requirements and Their Impact

India exemplifies how local reporting requirements and exchange control processes can delay inward remittances. For instance, when an exporter receives an inward payment, their authorized dealer bank (AD Bank) typically requires specific information from the exporter to generate an Inward Remittance Message (IRM). The bank must also reconcile the incoming payment with export documents, such as the shipping bill and purpose of payment, as part of the Export Data Processing and Monitoring System (EDPMS).

Mismatches or the failure to provide the exact information sought by the AD Bank can lead to delays in crediting funds to the exporter. Addressing these concerns is crucial for unlocking improved speeds for cross-border payments.

Technological Readiness for Change

On the technological front, India may be lagging. Currently, there is no 24x7 real-time solution for cross-border payments, and Indian banks are at varying degrees of readiness for migration to the ISO 20022 standard. While these issues may fall outside the scope of the draft guidelines, they need urgent attention.

Conclusion

The RBI's draft guidelines represent a step towards improving the efficiency of cross-border payments. However, addressing the underlying challenges, such as local regulatory requirements and technological readiness, is essential for achieving the desired outcomes. As the landscape of cross-border payments evolves, it is vital to ensure that all stakeholders are equipped to meet the demands of a faster, more efficient payment system.

By focusing on these areas, we can work towards a future where cross-border payments are seamless and efficient, ultimately benefiting businesses and consumers alike.