Indian PM says digital rupee will facilitate creation of global digital payment scheme

This is news to the rest of the world

Indian prime minister Narendra Modi has offered some more details about the nation’s newly revealed plan to introduce a central bank digital currency (CBDC) in the next year.

In a speech delivered to members of the Bharatiya Janata Party he leads, Modi explained that the proposed payment system will be the digital form of India’s physical currency and will be convertible into cash. The PM also said the digital currency will be accepted for digital, online, and retail transactions. In the latter scenario, he suggested merchants will appreciate a reduction in cash handling costs.

No details were offered of how individuals or merchants would handle payments. Nor too did Modi explain how a more eye-opening promise – the digital rupee will facilitate the creation of a global digital payment system – would be implemented.

India’s Reserve Bank, which gets the job of implementing the digital rupee, is also silent on that aspect of the currency and has offered no details after its initial announcement.

Just what India has in mind is therefore hard to divine, as the nation has not revealed any cross-border trials of its digital currency, which is yet to debut at home, never mind abroad.

Cross-border CBDC trials have, however, shown promise. A test conducted by China, Hong Kong, Thailand, and the UAE showed funds could move in four seconds, rather less than the multiple days such transfers can sometimes consume, and did so at half the cost of current transfers.

However Hong Kong’s central bank, a hoped-for participant in China’s CBDC, found seven significant issues that need to be addressed before cross-border payments could flow.

And, of course, the world already has several digital payment schemes. Modi did not outline how or of India’s digital rupee will improve on those offers. ®