- The Reserve Bank of India (RBI) is reportedly in talks with 18 different nations on the prospect of initiating cross-border payments via its Central Bank Digital Currency (CBDC), the ‘digital rupee’.
- This strategic move is aimed at bolstering India’s potential for foreign trade, particularly with countries experiencing a shortage of U.S. dollar reserves.
The Reserve Bank of India (RBI) has reportedly embarked on dialogue with central banks from no fewer than 18 countries worldwide. The topic at hand is the potential use of India’s Central Bank Digital Currency (CBDC), fondly referred to as the ‘digital rupee’, for cross-border transactions.
India’s Digital Rupee: A Cross-Border Game-Changer
This groundbreaking revelation about India’s ambitious plans for the global utilization of its CBDC was first reported by the Economic Times on June 27. The story draws on multiple public disclosures by Shaktikanta Das, the RBI Governor.
In a June speech delivered in London, Das highlighted the crucial role of foreign trade infrastructure for the digital rupee, which was projected to achieve 1 million domestic users by the onset of July. He stated,
“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.”
Banks from 18 different countries have reportedly opened rupee vostro accounts since July 2022. In a different public outing, Das expressed India’s keenness to offer its CBDC as a payment mechanism for importing Indian goods, especially for nations grappling with a shortage of United States dollars. He mentioned,
“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.”
A significant rationale behind India’s strong bet on the digital rupee for foreign trade transactions is to conserve the country’s U.S. dollar reserves. As Das explained,
“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.”
The RBI has been progressively pioneering its digital rupee project, having launched its wholesale digital rupee pilot in November 2022 and its retail version in February 2023. In March, it disclosed an agreement with the Central Bank of the United Arab Emirates to research a CBDC bridge for trade and remittances.
