The Reserve Bank of India (RBI) is "looking forward" to the internationalisation of central bank digital currencies (CBDCs) as they will sharply reduce settlement costs and time for international transactions.
"We have to understand that internationalisation of CBDC is crucial to addressing the payments issue that international bodies are dealing with now...which is cross-border payments," RBI deputy governor T Rabi Sankar said in New Delhi on September 7.
According to Rabi Sankar, while a lot of progress has been made in domestic payments globally, cross-border payments are still "stuck in the last century" in terms of costs and the time associated with these transactions.
"CBDCs, in my view, is the most efficient answer to this... For example, if India and the US have CBDCs, we don't have to wait for the banks to be open to settle transactions. The central banks on either side need not be open to get the finality of settlement. That massively takes out the settlement of risk from cross-border transactions. So, the internationalisation of CBDCs is something I am looking forward to," Rabi Sankar added.
The RBI plans to launch its CBDC some time this year. Moneycontrol recently reported that the central bank has asked four public sector banks to run a pilot project for its CBDC ahead of a wider rollout.
The four lenders are State Bank of India, Punjab National Bank, Union Bank of India, and Bank of Baroda.
The introduction of a CBDC is also seen by the RBI as a way to wean people off private cryptocurrencies. Speaking in June, Rabi Sankar said CBDCs could "kill" the reasons for the existence of private cryptocurrencies.
The RBI has been vocal in its opposition to private cryptocurrencies, saying they pose a risk to the financial stability of the country.
The government's consultation paper on cryptocurrencies is still awaited. The Centre is expected to detail its stance and provide clarity on the matter in the paper.
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