The Reserve Bank of India (RBI) and the European Central Bank (ECB) signed an updated Memorandum of Understanding (MoU) on May 10, 2026, to deepen institutional cooperation in central banking. Signed on the sidelines of the Bank for International Settlements (BIS) meetings in Basel, Switzerland, the agreement replaces a previous pact signed in 2015. This updated framework establishes a formal mechanism for regular policy dialogue, information exchange, and technical collaboration between two of the world’s most influential financial authorities.
Context and Signatories of the Agreement
The newly signed bilateral agreement marks a significant upgrade in relations between the Indian and European monetary authorities. The updated document was signed by the Governor of the Reserve Bank of India, Sanjay Malhotra, and the President of the European Central Bank, Christine Lagarde. The signing ceremony took place during the high-level gatherings of the Bank for International Settlements in Basel, a city globally renowned as the focal point for international central banking coordination.
This agreement formally replaces the earlier bilateral agreement signed on January 12, 2015. The original 2015 pact was signed by the then RBI Governor, Raghuram Rajan, and the then ECB President, Mario Draghi. Over the intervening eleven years, the global financial landscape has transformed. The rise of digital banking ecosystems, decentralized financial technologies, and systemic climate-related challenges necessitated a more modern, comprehensive framework to replace the decade-old agreement. The new agreement reflects these shifts, focusing on emerging technological frontiers and macroeconomic realities that did not exist in their current form in 2015.
Evolving Scope of the RBI-ECB Partnership
The updated framework provides a structured pathway for regular dialogue and information exchange across key areas of contemporary central banking. Unlike the 2015 agreement, which focused primarily on traditional macroeconomic research and monetary policy structures, the 2026 agreement includes deep technical cooperation in several cutting-edge areas of financial sector development.
Cross-Border Payments and Technological Integration
A major focus of the updated agreement is the technological integration of retail payment infrastructures. The RBI and the ECB have been collaborating on the realization phase of linking India’s Unified Payments Interface (UPI) with the Eurozone’s TARGET Instant Payment Settlement (TIPS) system. The UPI-TIPS linkage is designed to facilitate instantaneous, low-cost cross-border payments between India and the euro area. By incorporating this payment system linkage into the bilateral agreement, both central banks aim to establish secure technical standards and regulatory compliance mechanisms. This initiative will dramatically reduce the cost of remittances and trade settlements between the two regions.
Central Bank Digital Currencies and Digital Finance
Both institutions are currently at advanced stages of exploring sovereign digital currencies. The RBI is actively running pilot projects for its Central Bank Digital Currency (CBDC), known as the e-Rupee (e₹), in both retail and wholesale markets. Concurrently, the ECB is advancing the preparatory phase for the Digital Euro. The updated agreement establishes a formal channel for both central banks to share technical blueprints, research on cybersecurity frameworks, offline transaction capabilities, and strategies to prevent financial disintermediation. This exchange will assist both authorities in refining their respective digital currency architectures while ensuring global interoperability.
Sustainable Finance and Climate Risks
Addressing systemic ecological and climate risks has emerged as a core focus for modern monetary policy. The updated agreement incorporates sustainable finance into the bilateral dialogue. Both the RBI and the ECB are members of the Network for Greening the Financial System (NGFS), an international group of central banks dedicated to managing climate-related financial risks. Under the new agreement, the two central banks will share methodologies for climate stress testing, green bond frameworks, and supervisory practices to ensure commercial banks adequately price environmental risks.
Institutional Background of the Central Banks
To understand the operational and strategic importance of this bilateral collaboration, it is essential to examine the historical and institutional foundations of the two central banks, alongside the unique role of the Bank for International Settlements.
The Reserve Bank of India (RBI) was established on April 1, 1935, under the provisions of the Reserve Bank of India Act, 1934. It was set up based on the recommendations of the Royal Commission on Indian Currency and Finance, which is widely known as the Hilton Young Commission. While initially established as a private shareholding entity with its headquarters in Kolkata, the institution moved permanently to Mumbai in 1937. Following India’s independence, the central bank was nationalised on January 1, 1949, under the Reserve Bank (Transfer to Public Ownership) Act, 1948. Today, the RBI operates as the sole monetary authority of India, managing the country’s currency system, credit policies, and banking regulations.
The European Central Bank (ECB) was established on June 1, 1998, under the Treaty on European Union, commonly known as the Maastricht Treaty. Headquartered in Frankfurt am Main, Germany, the ECB is the prime monetary authority for the Eurozone, which consists of the European Union member nations that have adopted the euro as their single currency. The ECB works in tandem with the national central banks of all EU member states under the umbrella of the European System of Central Banks (ESCB). It is governed by a Governing Council, and Christine Lagarde serves as its President, having taken office in November 2019 as the first woman to lead the institution.
The signing took place on the sidelines of the Bank for International Settlements (BIS), which was established in 1930 and is headquartered in Basel, Switzerland. Known colloquially as the bank for central banks, the BIS is owned by sixty-three central banks and serves to foster international cooperation among monetary and financial regulatory authorities.
The table below outlines the primary institutional characteristics of the two central banks:
| Feature | Reserve Bank of India (RBI) | European Central Bank (ECB) |
|---|---|---|
| Establishment Year | 1935 | 1998 |
| Headquarters | Mumbai, India | Frankfurt, Germany |
| Governing Legislation | Reserve Bank of India Act, 1934 | Maastricht Treaty (Treaty on European Union) |
| Key Leadership | Sanjay Malhotra (26th Governor) | Christine Lagarde (President) |
| Primary Mandate | Price stability and credit regulation in India | Price stability and euro purchasing power in the Eurozone |
Key Takeaways
- The Reserve Bank of India (RBI) and the European Central Bank (ECB) signed a renewed Memorandum of Understanding (MoU) on May 10, 2026, to replace their previous 2015 agreement.
- The new agreement was signed by RBI Governor Sanjay Malhotra and ECB President Christine Lagarde on the sidelines of the Bank for International Settlements (BIS) meetings in Basel, Switzerland.
- The cooperation focuses on emerging financial technologies, including the technical realization phase of linking India’s Unified Payments Interface (UPI) with the Eurozone’s TARGET Instant Payment Settlement (TIPS).
- Both central banks will collaborate on sovereign digital currencies, specifically sharing technical blueprints and security frameworks for India’s e-Rupee (e₹) and the proposed Digital Euro.
- The Reserve Bank of India (RBI) was established on April 1, 1935, under the Reserve Bank of India Act, 1934, following the recommendations of the Hilton Young Commission.
- The European Central Bank (ECB), founded on June 1, 1998, under the Maastricht Treaty, is headquartered in Frankfurt, Germany.
