April 19, 2024
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India in Talks with Global Counterparts on Utilizing ‘Digital Rupee’ for Cross-Border Payments

The Reserve Bank of India (RBI) is engaging in discussions with counterparts from at least 18 countries to explore the potential of facilitating cross-border payments using its central bank digital currency (CBDC), known as the “digital rupee.”

The Economic Times first reported about RBI’s ambitious plans for utilizing the digital rupee in foreign trade, citing statements made by RBI Governor Shaktikanta Das. During a speech in London in June, Das emphasized the significance of foreign trade infrastructure in relation to the digital rupee’s growth, aiming to reach one million domestic users by the beginning of July. He highlighted the benefits of cross-border payments becoming faster, more seamless, and cost-effective through the use of the CBDC. The RBI remains in continuous communication with other central banks that have already introduced or are in the process of introducing their own CBDCs.

The report revealed that since July 2022, banks from 18 countries have initiated rupee vostro accounts. In a separate public appearance, Das explained India’s eagerness to offer its CBDC as a payment method for countries facing challenges with a shortage of United States dollars, making it easier for them to import Indian goods.

Furthermore, the RBI sees the digital rupee as a way to safeguard the country’s U.S. dollar reserves, aiming to avoid a repeat of past external sector crises, such as the “taper tantrum” period, when foreign inflows had to be attracted by offering incentives.

The RBI launched its wholesale digital rupee pilot project in November 2022 and the retail digital rupee pilot project in February 2023. Additionally, in March, the RBI announced a collaboration with the Central Bank of the United Arab Emirates to study the potential of a CBDC bridge for facilitating trade and remittances.

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