The Reserve Bank of India (RBI) and the Central Bank of the United Arab Emirates (UAE) announced on March 15 that they have signed a memorandum of understanding on cooperation and innovation in financial services.
In particular, the parties will focus on central bank digital currency (CBDC) interoperability and develop a proof-of-concept and pilot program for a CBDC bridge to facilitate remittances and trade. Such a bridge would reduce costs and increase the efficiency of transactions, they noted, and strengthen economic ties.
Indian and UAE Bank Officials held in February he talks about a rupee-dirham payment system using correspondent banks. This system has been in development for a year. The country currently uses US dollars to make payments.
He can walk and talk! @RBI and the Central Bank of the United Arab Emirates signed a memorandum of understanding for innovation in financial products. Central Bank Digital Currency (CBDC) development and interoperability closer than ever. @DasShaktikanta @MEEAIndia @Economyae @FinMinIndia @nsitharaman #FilePic pic.twitter.com/GDHC8Z9HdM
— India in UAE (@IndembAbuDhabi) March 15, 2023
Although remittances from the Gulf region declined by 50% from 2016–2017, the UAE remains the main source of remittances to India, accounting for 17–18% of the total of approximately USD 87 billion as of July 2022. The UAE was the top source for India until the outbreak of COVID, when it was relocated United States.
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India and the UAE would likely investigate retail CBDCs to process transfers. India currently has a domestic digital rupee pilot project with 50,000 users and 5,000 participating merchants. The RBI also announced in late February that it did made approximately 800,000 transactions worth $134 million with its wholesale CBDCs and tested the offline functionality of its CBDC.
India too recently integrated its non-blockchain unified payment interface with Singapore’s PayNow system.
The UAE has launched a nine-part financial transformation program and announced its intention to launch a CBDC for domestic and foreign us in February. Emirati banks had even before that participated in the mBridge pilot project, along with banks in Hong Kong, China and Thailand to use CBDC for cross-border transfers. In addition, the UAE expects cryptocurrency “to play a major role for the UAE’s future trade”, UAE Minister of State for Foreign Trade Thani Al-Zeyoudi he said at the World Economic Forum in January.
