RBI deliberating cross-border CBDC functionality with its global counterparts

As per the latest reports, India's central bank, The Reserve Bank of India, is presently in deliberations with its global peers for promoting CBDCs (central bank digital currency) for cross-border payments.

Currently, India is in talks with at least 18 other nations on exploring the cross-border functionality of CBDCs.

Last month, Shaktikanta Das, the RBI Governor, emphasised the importance of foreign trade infrastructure for the digital rupee, during a speech in London. 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.”

He further mentioned that the digital rupee is a leading area of interest, given its potential to improve international transactions.

RBI seeking collaborations

Recently, RBI has partnered with the UAE, i.e., the United Arab Emirates, on conducting joint studies on CBDC usage to settle international payments. It must be noted that both countries have sufficient economic resources to explore this new-age emerging tech, given the fact that a huge number of international remittances flow between the two nations owing to a growing Indian migrant population.

Another possible reason for advocating the digital rupee for foreign trade deals is to conserve the U.S. dollar reserves of the nation.

It must be noted that the RBI kickstarted the wholesale digital rupee pilot project last year in November 2022 and was followed by a retail digital rupee pilot project a month later. The central bank is exploring the use of the digital rupee for settlements of government bond transactions, money market funds, as well as short-term lending.