India has the potential to facilitate efficient cross-border payments using Central Bank Digital Currency (CBDC), according to the Reserve Bank of India (RBI) governor Shaktikanta Das.

Advancing International Money Transfers

During his keynote address at the conference on Central Banking at Crossroads, Das emphasized the role of CBDCs in improving international money transfers. This initiative is part of ongoing efforts to reduce the time and cost associated with overseas remittances.

24×7 Real-Time Gross Settlement System

Das pointed out that India is among the few large economies operating a 24×7 real-time gross settlement (RTGS) system. He mentioned that expanding the RTGS to settle trades in global currencies like the US Dollar, Euro, and British Pound is currently under review. This could be achieved through bilateral or multilateral arrangements, potentially integrating CBDCs to simplify global transactions.

CBDC Pilot Programs and Innovations

India’s CBDC pilot programs are currently testing programmability and interoperability with existing infrastructures such as the Unified Payments Interface (UPI). This platform facilitates near-instant settlements between banks. Additionally, the pilot program is working on developing offline solutions for remote areas and underserved communities.

“We are committed to enhancing financial inclusion through our digital currency initiatives,” said Das.

CBDC Adoption and Challenges

India launched its CBDC pilot for the digital rupee in December 2022, targeting both retail and wholesale segments. However, adoption has been gradual. By late June 2023, the digital rupee reached 1 million retail transactions, driven by incentives from local banks, including partially paid salaries in digital currency.

As of August, the CBDC platform surpassed 5 million users. Das advocates for a phased rollout, stressing the importance of understanding its impact on users, monetary policy, and the broader financial system.

Cryptocurrency Concerns

Governor Das reiterated his skepticism around cryptocurrencies, citing the uncertain landscape they create. He emphasized that CBDCs offer a controlled and stable digital currency, contrasting with the volatility of cryptocurrencies like Bitcoin and Ethereum. The RBI has consistently highlighted the potential risks cryptocurrencies pose to economic stability, including concerns about their lack of intrinsic value.

“A standardized and interoperable CBDC framework is crucial for global adoption,” Das noted, calling for international collaboration in developing such a framework.

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