The Reserve Bank of India (RBI) and the Central Bank of the United Arab Emirates (UAE) announced today that they have signed a Memorandum of Understanding on cooperation and innovation in financial services.
The two banks will specifically focus on central bank digital currency (CBDC) interoperability and will develop proof-of-concept and pilot programs for CBDC bridges to facilitate remittances and trade. The two banks said such a bridge would reduce costs, increase transaction efficiency and strengthen economic ties.
In February, Indian and UAE bankers held talks on a payment system for Indian rupees and UAE dirhams using correspondent banks. The system has been under development for a year. Currently, both countries settle in US dollars.
Walking the talk ! @RBI and UAE Central Bank signed a MoU for innovation in financial products. Development and interoperability in the field of Central Bank Digital Currencies (CBDCs) closer than ever. @DasShaktikanta @MEAIndia @Economyae @FinMinIndia @nsitharaman #FilePic pic.twitter.com/GDHC8Z9HdM
— India in UAE (@IndembAbuDhabi) March 15, 2023
Although remittances from the Gulf region are down 50% from 2016-17, the UAE remains an important source of remittances to India, accounting for 17-18% of the total of about $87 billion as of July 2022. occupied. The UAE was India’s largest source of remittances until the pandemic, but since the pandemic it has been overtaken by the United States.
India and the UAE are speculated to consider retail CBDCs to handle remittances. India is currently conducting a national pilot project for the digital rupee, with 50,000 users and 5,000 merchants participating in the project. The RBI also reported in late February that it had completed nearly 800,000 transactions worth $134 million on its wholesale CBDC and was testing the CBDC’s offline capabilities.
The UAE launched a nine-part financial transformation program in February, announcing its intention to launch a CBDC for domestic and cross-border payments. Earlier, banks in the UAE participated in the mBridge pilot project using CBDC for cross-border remittances, along with banks in Hong Kong, China and Thailand.Also, the UAE’s Minister of State for Foreign Trade Thani Al Zeyudi said at the World Economic Forum in January that the UAE expects cryptocurrencies to “play a major role in UAE trade going forward.” was
