Context:
The Reserve Bank of India (RBI) is in discussions with 4–5 countries, including Asian and European economies, to develop cross-border transaction systems using Central Bank Digital Currency (CBDC).
What is CBDC?
- A digital form of central bank-issued currency
- Legal tender, backed by the central bank
- Can be used for:
- Retail transactions (public use)
- Wholesale transactions (interbank settlements)
Key Developments
1. Cross-Border CBDC Collaboration
- RBI engaging with:
- Asian economies
- Advanced European economies
Objective:
- Build CBDC transaction rails for:
- Faster
- Cheaper
- More efficient cross-border payments
2. Expected Benefits
(a) Lower Remittance Costs
- Reduces:
- Intermediary charges
- Transaction fees
(b) Faster Transactions
- Eliminates delays caused by:
- Multiple banking layers
- Settlement systems
(c) Reduced Compliance Layers
- Simplifies:
- Verification processes
- Regulatory checks
