The CBDC aims to enhance the country’s potential for foreign trade with nations that lack U.S. dollar reserves.
The Reserve Bank of India (RBI) is currently in discussions with its counterparts from at least 18 other countries on the possibility of cross-border payments using its central bank digital currency (CBDC), the “digital rupee.”
The report about RBI’s ambitious foreign trade plans for India’s CBDC appeared in the Economic Times on June 27. It cites several public announcements by the RBI Governor, Shaktikanta Das.
In June, during a speech in London, Das emphasized the importance of foreign trade infrastructure for the digital rupee, which was set to reach 1 million users domestically by the beginning of July:
“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.”
According to the report, banks from 18 countries have already opened rupee vostro accounts since July 2022. In his other public appearance, Das explained India’s eagerness to provide its CBDC as a payment method for importing Indian goods for countries struggling with a supply of United States dollars:
“In India, we have no shortage of dollars, but in some other markets, due to a shortage of dollars, they are unable to do imports.”
Another reason for betting hard on the digital rupee for foreign trade deals is the intent to save the U.S. dollar reserves of the country:
“In the ‘taper tantrum’ period, suddenly, India had an external sector crisis, and the RBI had to attract foreign inflows by offering some incentives. We did not want to have a repeat of that situation.”
The RBI launched its wholesale digital rupee pilot project in November 2022 and its retail digital rupee pilot project in February 2023. In March, it announced an agreement with the Central Bank of the United Arab Emirates to study a CBDC bridge for trade and remittances.