The central bank digital currency CBDC, which is to be launched this year could become a tool for reducing time and cost for cross-border transactions
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T Ravi Shankar, Deputy Governor of the Reserve Bank Of India (RBI), On Wednesday said that the central bank digital currency (CBDC), which is to be launched this year could become a tool for reducing time and cost for cross-border transactions.
He added that RBI has already proposed to launch it on a pilot basis this year, as was announced by Finance Minister Nirmala Sitharaman in the Union budget 2023.
The finance minister has also said that the RBI would roll out a digital equivalent to the rupee in the current financial year.
While speaking at the India Ideas Summit, Shankar stated that the importance of internationalising CBDC to address payment issues that bodies such as the G20 and the Bank for International Settlements are dealing with must be understood by all.
Even with India's excellent, cheap and fast domestic payment system, the cost of cross-border payment, however, is still high, he said. Moreover, he noted that there is huge scope for improvement in terms of both cost and speed. He further added that CBDC is probably the most efficient answer to this. For example, if India's CBDC and the US CBDC systems can talk to each other, we don't have to wait for settled transactions.
He further added that doing so will massively take out the settlement risk from cross-border transactions, which in turn will reduce both time and cost. Hence, he is looking for CBDC internationalisation.
With respect to fraud management, Sankar added that digital payments are made to be scaled up while preserving system integrity, which essentially means technical stability.
It not only means that the technical failures of transactions need to be minimised, but also means that transactions themselves need to inspire confidence, we cannot have several instances of fraud, he said.
He also noted that in order to scale up digital payments, fraud management is an area that we all need to focus on.
Citing the example of the unified payment interface for non-feature phones, Shankar said that RBI has paid special attention to the fact that the digital payment technology needs to be inclusive.
Adding that innovative impulse is something that we would want the industries to look forward to. She mentioned talking about innovation in terms of what the Reserve Bank of India Innovation Hub has been doing.
When it comes to data security, the central government has to keep working on it on a continuous basis, he added.
He pointed out that there is never a moment when we can feel secure enough for data security because the moment you feel secured enough is the moment in which you get vulnerable.