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India Explores Swift Alternatives for Digital Cross-Border Settlements
November 28, 2023
In a bid to revolutionize cross-border transactions, India’s banking regulator, the Reserve Bank of India (RBI), is engaging in discussions with counterparts in the US and Hong Kong, along with the Society for Worldwide Interbank Financial Telecommunications (Swift). According to sources close to the development, the focus is on evaluating the feasibility of swift and cost-effective digital cross-border settlements, likely involving the use of central bank digital currencies (CBDC).
An internal working group at the RBI is actively exploring technological avenues to create a roadmap for direct transactions between countries. CBDCs, the digital equivalent of traditional paper money, have the potential to transform cross-border settlements, streamlining the process without the need for platforms like Swift.
Mihir Gandhi, Partner and Leader of Payment Transformation at PwC India, emphasized the advantages of CBDCs, stating, “While the current practice involves settling transactions through traditional banking channels, CBDC could enable direct settlement between parties.” However, he also noted that India must address challenges and proactively manage associated risks.
These developments align with India’s recent efforts to establish real-time cross-border fund transfer systems with countries like Singapore and the UAE. Over the past year, the RBI has consistently emphasized the pivotal role CBDCs can play in expediting and reducing costs associated with cross-border payments. As India explores innovative solutions, the financial landscape may witness a significant shift in the way international transactions are conducted.
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