The Reserve Bank of India (RBI) continues expanding its central bank digital currency (CBDC) pilot with new plans to promote the digital rupee for international trade payments. Less than a year after unveiling its wholesale and retail trials, the central bank has announced various projects to expand the locations and number of partners, as well as the potential use cases.
“CBDC is going to be the future of money. We are preparing ourselves for that,” said Shaktikanta Das, RBI Governor, during a recent interview with Central Banking, which was reported by the Economic Times.
“By the end of this month, we hope to reach about one million users of retail CBDC. That is for domestic payments. 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.”
The reference to trade could include a previously announced alliance with the United Arab Emirates (UAE) for cross-border CBDC transactions, targeting remittances and trade. The two countries have strong economic ties due to the large number of Indian migrant workers in the UAE, so the bridge could help both countries reduce costs and improve efficiencies in cross-border payments.
Wholesale CBDC trials
The RBI has been quite busy since launching its first wholesale trials in November last year, progressing fairly rapidly compared to other countries. Back in February, we reported about its plans to explore different business models and expand the original objective of using the digital rupee to settle government bond transactions. Examples included money market funds and short-term lending, such as call money.
Retail CBDC plans
As for its retail trials, the RBI said in May that the results so far were quite satisfactory. Despite having less than $1 million digital rupee in circulation, the central bank was keen on expanding the scale of experiments with ten more regions and five more bank partners.
Its governor now aims to reach one million users by the end of the month, up from 50,000 back in February. One important factor is the success of the country’s UPI system for instant payments, which is already well-established and quite efficient.