The CBDC seeks to increase the country’s capacity for international trade with countries without U.S. dollar reserves.
The Reserve Bank of India (RBI) has been actively pursuing conversations with the central banks of 18 other nations to investigate the viability of cross-border payments using its central bank digital currency (CBDC), also known as the “digital rupee.” The Economic Times covered this incident on June 27, shedding light on statements made by RBI Governor Shaktikanta Das regarding India’s plans for the digital rupee in international trade.
In a lecture given in London, Governor Das emphasized the significance of developing a strong global trade infrastructure to underpin the digital rupee. By the beginning of July, the RBI intended to hit a critical milestone: one million domestic users of the digital rupee, a symbol of the CBDC’s expanding use and acceptance in India.
According to the study, starting July 2022, banks from 18 different nations have started the process of opening rupee vostro accounts. These accounts enable foreign banks to store Indian rupees to support international trade. According to Governor Das, India is eager to encourage the usage of the digital rupee as a payment option for nations that have trouble accessing a sufficient supply of 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 do imports.”
One of the main reasons India is focusing on using the digital rupee for cross-border payments is to preserve the nation’s U.S. dollar reserves, in addition to promoting international trade. India wants to lessen its reliance on the dollar and increase its economic independence by promoting the use of the digital rupee.
The RBI has taken a proactive approach to the rollout of the digital rupee, kicking up a pilot project for the wholesale version in November 2022 and a retail version in February 2023. These pilots act as a usability and functionality test bed for the CBDC.
Additionally, the RBI and the Central Bank of the United Arab Emirates formed a partnership in March to investigate the creation of a CBDC bridge for commerce and remittances between the two nations.
The RBI exhibits India’s commitment to utilizing CBDC technology to promote international transactions by its interactions with foreign central banks and its pursuit of cross-border payments using the digital rupee. India wants to promote economic growth, improve financial inclusion, and establish itself as a leader in the world of digital currencies. To do this, it is looking at the potential of CBDCs in cross-border trade.