India Expands Digital Payment Systems and CBDC Testing Efforts
India is enhancing its mobile payment systems and establishing cross-border payment links with various countries. Reserve Bank of India (RBI) Deputy Governor T. Rabi Sankar confirmed arrangements with Sri Lanka and ongoing discussions with the UAE and neighboring nations, including Bhutan and Nepal.
“We have one arrangement with Sri Lanka. We are working out with other countries like UAE and some neighboring countries as well.”
The RBI aims to create an efficient digital payment system for Indian citizens and has partnered with other Asian central banks to develop a platform for immediate cross-border payments, facilitating faster trade and remittances.
India's digital currency, the e-rupee, launched in 2022, serves as a digital version of the national currency. It remains in testing phases, with a slow adoption rate reaching only 1 million retail transactions by mid-2023. The RBI is examining aspects such as security and the impact on bank deposits and money management.
RBI's Cautious Approach to Central Bank Digital Currency
Deputy Governor Michael Debabrata Patra expressed concerns regarding CBDCs' potential effects on banking stability, noting that during financial crises, individuals may prefer CBDCs over traditional deposits, which could diminish bank funds. The implications of CBDCs on bank deposits and deposit insurance remain uncertain, complicating their implementation.
Despite these concerns, a Bloomberg report indicates the RBI views CBDCs as a future currency and a cost-effective solution for cross-border payments, commercial transactions, and remittances. Governor Shaktikanta Das proposed providing technical support to nations seeking standardized international cross-border payment frameworks.
Deputy Governor Sankar stated that India is not rushing to launch its digital currency publicly, emphasizing the need for clarity on the CBDC's outcomes before proceeding. Currently, no specific timeline exists for its public rollout.
“We are in no hurry to roll it out immediately; once we have some visibility of what the outcome or impact will be, we’ll roll it out. We don’t keep a specific timeline for that,” he claimed.