Context:
Major defence deals with Russia have been delayed as Russia being shut out of the global SWIFT system for money transfers.
About SWIFT Payment System:
- SWIFT – Society for Worldwide Interbank Financial Telecommunications
- A messaging network used by banks and financial institutions globally
- Purpose – For quick and faultless exchange of information pertaining to financial transactions.
- It has 8-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
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: The Hindu
Previous Year Questions
With reference to the Indian economy, consider the following statements:
- An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.
- An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
- An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
Which of the above statements are correct?
[UPSC Civil Services Exam – 2022 Prelims]
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (c)
Convertibility of rupee implies
[UPSC Civil Services Exam – 2015 Prelims]
(a) being able to convert rupee notes into gold
(b) allowing the value of rupee to be fixed by market forces
(c) freely permitting the conversion of rupee to other currencies and vice versa
(d) developing an international market for currencies in India
Answer: (c)
