Context:
Trump’s threat to impose 100% tariffs on BRICS nations for ditching the dollar highlights the critical role of SWIFT in global financial transactions, impacting countries like India.
SWIFT:
- SWIFT – Society for Worldwide Interbank Financial Telecommunication
- A messaging network used by banks and financial institutions globally
- Purpose – For quick and faultless exchange of information pertaining to financial transactions.
- Founded in – 1973 by 239 banks from 15 countries
- It has 8 to 11-character SWIFT code
- Headquarters – Belgium
- Controlled by – G-10 central banks (Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, United Kingdom, United States, Switzerland, and Sweden), European Central Bank and National Bank of Belgium.
- It does not hold any securities or money.
- It facilitates standardised and reliable communication to facilitate the transaction.
- It had replaced the much slower and far less dynamic Telex.
- Highest contributors – Europe, Middle East, and Africa
- Countries out of SWIFT – Iran, North Korea, Belarus and Russia
- SWIFTNet – Private global network for banking communication created by banks and managed by SWIFT.
Telex is an international message-transfer service that allowed users to send and receive text messages over a network of teleprinters.
Swift Oversight Forum:
- Established on 2012.
- Joined by other countries’ central banks from Australia, China, Hong Kong, India, Korea, Russia, Saudi Arabia, Singapore, South Africa, and Turkey.
Swift India Domestic Services:
- A member-owned cooperative created by the Indian community.
- Known as Swift India.
- Launched in – 2014 (Mumbai)
- Features –
- It includes partners of leading public and private banks.
- It is fully committed to serving and addressing domestic market needs.
- It offers deep expertise and experience in international standards and best practices.
Alternate mechanisms to SWIFT:
- System for Transfer of Financial Messages (SPFS) – A Russian equivalent of the SWIFT
- Financial messaging system of the Bank of Russia (FMS) – SWIFT analogue
- Cross-Border Interbank Payment System (CIPS) – China’s alternative to SWIFT
- CIPS is a payments settlement system, while SWIFT just handles payment-related communications.
- India’s alternate to SWIFT – Rupee-Rial Architecture (Iran) and Rupee-Rouble Trade Arrangement (Russia).
Source: IE
Previous Year Question
With reference to Central Bank digital currencies, consider the following statements:
1. It is possible to make payments in a digital currency without using US dollar or SWIFT system.
2. A digital currency can be distributed with a condition programmed into it such as a time-fame for spending it.
Which of the statements given above is/are correct?
[UPSC CSE – 2023 Prelims]
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (c)
