RBI Explores Cross-Border Payments

The Reserve Bank of India (RBI) is currently in talks with its counterparts from at least 18 other nations regarding the possibility of cross-border payments using its central bank digital currency (CBDC), the “digital rupee.”

The Economic Times published a report on the RBI’s ambitious foreign trade plans for India’s CBDC on June 27. Several public statements by RBI Governor Shaktikanta Das are cited.

In a June speech in London, Das emphasized the significance of foreign trade infrastructure for the digital rupee, which was expected to reach one million domestic users by the beginning of July:

“But cross-border payments will also become much quicker, more seamless and very cost-effective. That is another area where a lot of attention needs to be given. We are constantly in dialogue with other central banks that have introduced or are introducing CBDCs.”

Since July 2022, according to the report, banks from 18 countries have opened rupee vostro accounts. In his other public appearance, Das explained India’s eagerness to offer its CBDC as a method of payment for the importation of Indian goods by nations experiencing a shortage of U.S. dollars:

“In India, we have no shortage of dollars, but in some other markets, due to a shortage of dollars, they are unable to do imports.”

The desire to preserve the country’s U.S. dollar reserves is another reason for heavily emphasizing the digital rupee in international trade transactions:

“In the ‘taper tantrum’ period, suddenly, India had an external sector crisis, and the RBI had to attract foreign inflows by offering some incentives. We did not want to have a repeat of that situation.”

In November 2022, the RBI launched its wholesale digital rupee pilot project, and in February 2023, it launched its retail digital rupee pilot project.

It announced an agreement with the Central Bank of the United Arab Emirates to study a CBDC bridge for trade and remittances in March.