The Reserve Bank of India (RBI) is engaging in discussions with central banks from at least 18 countries to explore the potential use of its central bank digital currency (CBDC), known as the "digital rupee," for cross-border payments. The RBI's foreign trade plans for the digital rupee were highlighted in a report published by The Economic Times on June 27, which referenced statements made by RBI Governor Shaktikanta Das.
Governor Das emphasized the significance of foreign trade infrastructure for the digital rupee during a speech in London, noting that cross-border payments would become faster, more seamless, and cost-effective. He stated that the RBI is in constant dialogue with other central banks that have introduced or are introducing CBDCs.
According to the report, banks in 18 countries have already opened rupee vostro accounts since July 2022. Governor Das highlighted India's eagerness to offer the digital rupee as a means of payment for importing Indian goods, particularly in countries facing challenges with the availability of the US dollar. He stated, "In India, we don't have a shortage of dollars, but in some other markets, they can't import because of dollar shortages."
One of the motivations behind promoting the digital rupee in foreign trade deals is to preserve India's dollar reserves. Governor Das referred to a past external sector crisis during the "taper tantrum" period when India had to attract foreign capital inflows by providing incentives. The RBI Aims to avoid repeating similar mistakes and believes that the digital rupee can help safeguard the country's reserves.
The RBI initiated the wholesale digital rupee pilot project in November 2022 and the retail digital rupee pilot project in February 2023. In March, the RBI announced a partnership with the United Arab Emirates Central Bank to explore a CBDC bridge for trade and remittance s.
