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The Reserve Bank of India (RBI) is actively exploring the potential of its digital currency, the digital rupee, for cross-border transactions. The RBI is in discussions with central banks from approximately 18 countries, according to a recent report in the Economic Times.
The RBI Governor, Shaktikanta Das, emphasized the importance of foreign trade infrastructure for the digital rupee, with an expected domestic user base of 1 million by early July. Das highlighted the potential for cross-border transactions to be faster, smoother, and cost-effective with the digital rupee:
“That is another area that needs to be given a lot of attention. We are in regular contact with other central banks that have introduced or are introducing CBDCs.
As of July 2022, banks from 18 countries have established rupee vostro accounts, reflecting the growing international interest in the digital rupee. Talking about countries that often face shortage of USD, Das explained that India is ready to offer its digital rupee for importing Indian products:
“In India, we don’t have a shortage of dollars, but in other markets, because of the lack of dollars, they can’t import.”
RBI is also encouraged to promote digital rupee for foreign trade transactions to conserve USD reserves in the country. Das referred to a previous crisis in India’s external sector during the “taper tantrum” period when the RBI had to bring in foreign inflows, and the RBI wanted to avoid a repeat of such a situation.
The RBI has started two pilot projects: the wholesale digital rupee in November 2022 and a retail digital rupee in February 2023, reaching 50,000 users and 5,000 merchants, The Economic Times reported.