India will push BRICS nations to expand the use of central bank-backed digital currencies for cross-border payments, while stopping short of supporting a unified payments network that could be seen as a challenge to the dollar, according to people familiar with the matter.
India has signed agreements with central banks in the UAE, Mauritius, Maldives and Indonesia to use local currencies for trade while more such agreements are being negotiated, Reserve Bank Governor Sanjay Malhotra said recently. India’s Ministry of External Affairs spokesman Randhir Jaiswal said it would be premature to conclude what is being discussed at the Finance Ministers-Central Bank Governors meetings which began on Wednesday, and urged reporters to await the joint statement. Instead, India is proposing BRICS countries link up their central bank digital currencies for cross-border transactions, thereby reducing reliance on banks and cutting down on costs. India is also in favor of countries using their local currencies to settle trade, instead of resorting to a third currency, like the dollar. The RBI did not respond to a request for comment. India already has a digital rupee in pilot testing, while China and Russia have also been experimenting with their own central bank digital currencies.
Because the discussions are private, with India chairing BRICS this year, Prime Minister Narendra Modi favors using central bank digital currencies to settle bilateral trade between members, the people said, asking not to be identified.
An agreement on a single bloc-wide payments settlements system at the upcoming leaders’ summit in New Delhi this weekend is unlikely, they said.
For countries such as India, more trade in local currencies can provide a buffer against volatile global capital flows, according to Sonal Varma, a Singapore-based economist at Nomura Holdings Inc.
