India begins talks on using CBDC with 18 countries

The Reserve Bank of India (RBI) is discussing the possibility of cross-border payments using the digital rupee with at least 18 countries. The Economic Times reports.

The RBI Governor Shaktikanta Das emphasised the importance of external trade infrastructure for CBDC. He estimates that by July the number of central bank digital currency users within the country should reach 1 million.

“Cross-border payments will become much faster, more transparent and cost-effective. This is another area that requires significant attention. We are in constant contact with other central banks that have introduced or are introducing CBDCs,” he added.

According to the RBI’s report, since 2022 more than 18 countries have opened accounts in the digital rupee.

The RBI plans to use the new financial solution in payments for imports for countries that are facing difficulties sourcing from the United States due to a dollar shortage.

According to Das, India itself does not need the American currency. On the contrary, the introduction of CBDC will help the country preserve its dollar reserves.

During the period in 2013, when foreign institutional investors pulled funds out of India’s bonds and equities, causing the rupee to crash, India suddenly faced an external-sector crisis, and the RBI had to attract foreign investment by offering additional incentives. We did not want a repetition of that situation,” the central bank governor added.

On 1 November 2022, the country started trials of the wholesale version of CBDC. This version of the digital rupee was used in settlements for deals in government securities on the secondary market.

The testing of the retail version of CBDC with participation of individual merchants and consumers began on 1 December. It involves eight banking institutions.

In June, Deputy RBI Governor Rabi Sankar suggested that CBDCs could fully displace private virtual currencies, including Bitcoin.