The Reserve Bank of India (RBI) Governor has emphasized the need to reduce both the time and cost associated with overseas remittances, while also expanding the Real-Time Gross Settlement (RTGS) system to handle transactions in major currencies.
Speaking at the ‘Central Banking at Crossroads’ conference, Governor Shaktikanta Das highlighted the role Central Bank Digital Currencies (CBDCs) could play in enhancing cross-border payments.
“Remittances are crucial for many emerging and developing economies, including India, to explore cross-border peer-to-peer (P2P) payments,” said Das. “We believe there is significant potential to reduce the cost and time for such remittances.”
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CBDCs Have Potential To Improve Cross-Border Payments
Das further discussed India’s advanced 24/7 RTGS system, noting the possibility of expanding its use for settling transactions in major trade currencies.
He mentioned the ongoing efforts between India and other countries to link cross-border fast payment systems, exploring both bilateral and multilateral arrangements.
The RBI Governor also underscored the potential of CBDCs to facilitate efficient cross-border payments. India is among the few countries to have launched both wholesale and retail versions of CBDCs.
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He’s pushing for smoother, cheaper cross-border payments—super clutch for emerging economies like… pic.twitter.com/bWRHHw6F5W
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He noted that India’s ongoing pilot projects are testing features like programmability, interoperability with the Unified Payments Interface (UPI), and offline solutions for remote and underserved populations.
Das stressed the importance of standard harmonization and interoperability for CBDCs to successfully facilitate cross-border payments. These measures, he said, could also help mitigate financial stability risks associated with cryptocurrencies.
He suggested that while each country may tailor its system to domestic needs, a plug-and-play framework could allow for replicating India’s successful experience.
In addition, Governor Das raised concerns over the misuse of Artificial Intelligence (AI) in the banking sector, warning that it could increase the risk of cyberattacks and data breaches.
He urged banks to implement robust risk mitigation measures and to harness AI and Bigtech advancements without being overshadowed by them.
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India Maintains Controversial Tax Rules
As reported, Finance Minister Nirmala Sitharaman has upheld the controversial crypto tax regulations during the announcement of the fiscal year 2024-2025 budget.
Despite extensive lobbying from the cryptocurrency industry, which presented substantial evidence to advocate for a reduction in the tax-deducted-at-source (TDS) policy from 1% to 0.01%, the existing rules remain unchanged.
The cryptocurrency sector had also requested the government to introduce progressive taxes on gains instead of the existing flat 30% rate and to allow losses to offset gains.
India’s stance on cryptocurrencies has been somewhat ambiguous. The imposition of strict crypto taxes in 2022 and the crypto market downturn led Indian traders to switch to international exchanges, negatively impacting the local crypto industry.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
