India in multi-jurisdictional talks on cross-border payments: RBI

He said that India has made efforts to tackle the challenge of the high cost of remittances.


Reserve Bank Deputy Governor T Rabi Sankar said on Friday that despite the technology available, the high cost of remittances for countries was “unconscionable” and India is in talks with several jurisdictions to gain significant influence over cross-border payments.

Sankar said during a virtual speech at the BCC&I Indo-Pacific Economic Conclave that according to World Bank research, global cross-border remittances in 2022 were estimated to be USD 830 billion, with India the largest recipient.

“According to the World Bank’s Worldwide Remittance Database, the global average cost of a retail transfer size (retail size – USD 200) was 6.2 percent in the fourth quarter of 2022. For some countries, this cost could be as high as 8 percent.

“Such high costs in today’s context, where data connectivity is so cheap, is simply unfathomable. I think that given the available technology, the current situation is not sustainable,” he said.

The top RBI official said that India has been making efforts to tackle the challenge of the high cost of money transfers and the recently introduced central bank digital currency (CBDC) offers a potential solution in this regard.

“If we come up with a technologically viable solution to connect the CBDC systems across countries, it can dramatically reduce the cost of cross-border payments by completely bypassing the old correspondent banking system,” Sankar said.

However, he said this will require international cooperation and agreement on several legal and technological protocols, “which should be quite feasible in today’s hyper-connected global economy”, especially when the welfare gains are significant.

“We are in talks with some other jurisdictions to have a significant impact on the high cost of money transfers,” Mr Sankar said.

In February this year, India and Singapore had activated the UPI-PayNow link to enable users in both countries to make convenient, secure, instant and cost-effective cross-border transfers using their respective mobile apps.

“We have followed this up in July by signing a memorandum of understanding with the UAE Central Bank (for) cooperation on interconnection on mutual payments and messaging systems, among others,” Mr Sankar added.

The RBI deputy governor also spoke about the risks that private digital currencies pose to countries like India and other emerging economies.

Such currencies hamper the ability of emerging market countries to manage their external sector or maintain political independence, he said.

“Within the private virtual currency set, the inherent flaws, vulnerabilities, and risks posed by stablecoins outweigh their purported benefits. In fact, all of the perceived benefits of stablecoins might be more easily and responsibly achieved by connecting CBDCs or rapid payment systems with differential jurisdictions ,” Mr. Sankar said.

Meanwhile, Ajay Seth, Secretary, Department of Economic Affairs, at a special session on ‘India Leads – Towards 3rd Largest Economy’ called for more private investment in the infrastructure sector and a “creative redevelopment” of cities.

“It’s a sector in particular that attracts very little private capital. At the moment, only about 5 percent of investment in infrastructure comes from private capital. And it’s not sustainable in the sense that governments’ capacity is limited, so we have to create opportunities for the private sector to enter.

“Our journey in the future will depend on the amount of our success in ‘Amrit Kaal’. The role of our cities and an orderly transition to urbanization is going to play a big role,” said Mr. Seth.

Prime Minister Narendra Modi has described the next 25 years until the centenary of India’s independence in 2047 as ‘Amrit Kaal’.

Seth said more focus is required on the energy sector, which is currently “not exactly open to market forces”.

The cost recoveries in the sector are not optimal for economic forces to have a good play, he said.

The senior official also cited retraining and efficiency gains in the financial sector in terms of cost and ease of intermediation as critical aspects in India’s journey to become the third largest economy in the world.

(With the exception of the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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