India’s Central Bank Wants to Start International CBDC Payments
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According to recent reports, the Reserve Bank of India (RBI) has recently entered a dialogue with other central banks from at least 18 different countries. The central bank is exploring its openness toward the possibility of cross-border payments using a central bank digital currency (CBDC).
RBI is reaching out to other central banks for CBDC usage
It appears that the RBI intends to switch to a CBDC for international payments, assuming that it can identify interested parties. The bank’s argument is that the CBDC could enhance the country’s potential for foreign trade, even with nations that lack USD reserves.
The report regarding the RBI’s intention to encourage other nations’ central banks to use the digital rupee originally came out on June 27th, published by the Economic Times. The publication pointed out several public announcements by Shaktikanta Das, the Governor of the Reserve Bank of India.
Das held a speech in London last month, emphasizing the importance of foreign trade infrastructure for India’s CBDC. According to Das ‘ prediction, the digital rupee was set to reach 1 million users within the country by early July. He said, “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.”
India’s CBDC could enable nations with USD shortage to import goods
The report also mentioned that banks from 18 countries opened rupee vostro accounts over the past 12 months. In a different speech, Das spoke of India’s excitement and eagerness to provide the digital rupee as a payment method for importing local goods into other countries. He especially highlighted that it would be a game-changer for nations struggling with the USD supply.
Stressing that India has no shortage of dollars, he acknowledged that some markets struggle, making it difficult or even impossible for them to do imports. However, this is not the only reason the country pushes digital rupee. Another big motivation is the fact that using it for foreign trade deals would allow India to save up the dollar reserves.
Das stated that India had an external sector crisis in the “taper tantrum period.” The RBI thought things could improve if the country attracted foreign inflows through certain incentives. Now, it is looking into alternative solutions so that history doesn’t end up repeating itself.
Initially, the RBI launched the wholesale digital rupee pilot project last November. As for the retail digital rupee pilot, it went live in February of this year. Only a few weeks later, in March, the RBI announced that it reached its first agreement, which was with the Central Bank of the United Arab Emirates. The two agreed to study a CBDC bridge for remittance and trade purposes.
Pleased with the deal, the RBI is now looking to expand on the idea, and is also trying to attract other central banks.
