The future Central Bank Digital Currency (CBDC) of India, according to Reserve Bank of India (RBI) Deputy Governor T Rabi Sankar, may be seen as a tool that significantly cuts the time and expense associated with cross-border transactions. The RBI Deputy Governor noted that although India has an effective domestic payments system, cross-border payments continue to be relatively expensive. He then made reference to the RBI’s “Digital Rupee” project, which Finance Minister Nirmala Sitharaman announced in the Union Budget earlier this year as a potential solution to the issue.
Addressing the India Ideas Summit, an event hosted by the US-India Business Council India (USIBC), T Rabi Shankar said, “We have to understand that internationalisation of CBDC is crucial to addressing the payments issue that bodies like G-20 and Bank for International Settlements (BIS) are dealing with now.”
The RBI Deputy Governor reportedly stated that India has a great domestic payments system that is inexpensive and quick as opposed to a cross-border payments system that is relatively pricey. He pointed out that there is a tonne of room for improvement in terms of both price and speed.
He added that CBDC is probably the most effective way to solve this issue, and that if the systems in India and the US can communicate with one another, we won’t have to wait for transactions to settle.
“That massively takes out the settlement risk from cross border transaction that reduces time, that reduces cost. So, CBDC internationalisation is something that I’m looking forward to,” he said.
The Reserve Bank executive’s remarks follow a Moneycontrol article from earlier this week that stated the RBI had spoken to four public-sector banks to operate the CBDC pilot internally. These banks are State Bank of India, Punjab National Bank, Union Bank of India, and Bank of Baroda.
In order to ensure that there are as few deployment hiccups as possible, it was also said that the RBI is apparently working with many fintech firms on the Digital Rupee project. One of them is the American company Fidelity National Information Services (FIS), which has been assisting central banks on CBDC issues such cross-border CBDC payments, offline and programmable payments, and financial inclusion.
The RBI intends to roll out India’s CBDC gradually over the current fiscal year, which ends in March.