India promotes global cross-border payments for the digital rupee.

The Reserve Bank of India (RBI) is working towards expanding the scope of its Central Bank Digital Currency (CBDC), known as the “digital rupee,” by engaging in discussions with foreign countries to adopt cross-border payment systems.

The RBI is currently in talks with central banks in at least 18 countries to explore ways to facilitate trade between nations that lack US dollar reserves.

According to a report by the Economic Times on June 27, the country is conducting studies and experiments in various areas beyond its domestic payment landscape.

RBI Governor Shaktikanta Das emphasized the importance of accelerating foreign infrastructure to meet the growing demand for the digital rupee.

“Cross-border payments will also become faster, more seamless, and cost-effective. This is another area that requires significant attention. We are constantly in dialogue with other central banks that have already introduced or are in the process of introducing CBDCs.”

This development comes months after the RBI and the Central Bank of the United Arab Emirates announced plans to collaborate on cross-border payments. Both countries signed a memorandum of understanding (MoU), which involves joint research into CBDC-related pilots and proofs-of-concept.

As per the MoU, the objective of both institutions is to “reduce costs, enhance the efficiency of cross-border transactions, and strengthen economic ties between India and the UAE.”

Highlighting the need to boost India’s exports through the digital rupee, Das mentioned that it provides a solution for countries with limited access to US dollars.

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

The digital rupee is changing the narrative

Since the launch of India’s CBDC in November 2022 and February 2023 for wholesale and retail use, respectively, it has gained traction in multiple markets, thanks to the research and innovation efforts of the RBI.

The project has garnered over 50,000 users within two months, with plans to onboard over one million users as it expands its use cases across various jurisdictions.

The RBI is exploring the integration of the digital rupee in money market funds, lending, and government-backed bonds.

“We want to have as many use cases as possible,” stated RBI Deputy Governor T. Rabi Sankar. “We will also explore account-based CBDC. However, this pilot is not intended to replace the existing NDS-OM system used by banks and others.”

The RBI’s efforts to bridge the gap between trade and remittances in the region have inspired similar initiatives by financial institutions in many countries.

A study by the Atlantic Council indicates a significant increase in wholesale CBDC developments since Russia’s invasion of Ukraine. Currently, over 130 central banks are engaged in CBDC-related research.

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