RBI chief urges banks to back CBDC for cross-border payments

Sanjay Malhotra, Governor of the Reserve Bank of India (RBI), has called on central banks across the globe to prioritize and support central bank digital currencies (CBDCs) rather than stablecoins, for faster and safer cross-border payments. Addressing the annual meeting of the World Bank Group and International Monetary Fund (IMF) in Washington, Malhotra cautioned that the worldwide advantages of CBDCs will be restricted if other countries do not move quickly to implement them.

“Unless other countries also adopt CBDC, we are not going to see the benefits of CBDC insofar as cross-border payments are concerned. So, I urge all those present from central banks and other jurisdictions that we need to promote the CBDC because this has huge advantages over stablecoins,” he said.

“Stablecoins, which is one of the better forms of crypto, has huge promise for asset tokenization, but it falls short of the requirements as a mainstay for monetary systems. And so, we believe that it is CBDC and not crypto because it has huge implications for monetary policy, for controls that we have on the capital account. It has implications for money laundering, and so we would rather promote CBDC rather than any other form of crypto because CBDC has all the advantages…,” Malhotra explained while referring to the BIS annual economic report of 2025.

According to the RBI chief, CBDC is fiat with all the advantages of a stablecoin. It can be tokenized and can reduce the costs involved in cross-border payments. A CBDC also enjoys the advantages of singleness and the integrity of money.

“In India, we are of the view that the CBDC is the answer for cross-border payments…so all of us need to promote that. Only then we’ll be able to actually roll it out at a large scale,” he added.

The RBI recently announced plans to tokenize financial assets and settlements through its wholesale CBDC. The decision is based on promising initial outcomes from pilot programs involving the issuance of Certificates of Deposit (CDs), which have shown potential to improve market efficiency. A CD is a fixed-income financial instrument regulated by the RBI.

RBI started its first CBDC pilot in the wholesale segment on November 1, 2022, to settle secondary market transactions in government securities. The pilot began with nine banks—State Bank of India (NASDAQ: SBKFF), Bank of Baroda, Union Bank of India, HDFC Bank (NASDAQ: HDB), ICICI Bank (NASDAQ: IBN), Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and HSBC (NASDAQ: HSBC).

The retail CBDC pilot started on December 1, 2022, and users were able to transact through a digital wallet offered by the participating banks and stored on mobile phones or devices.

Currently, India has about seven million CBDC users and is in no rush for a full rollout of the e-rupee. While India’s retail CBDC pilot is examining its use as cash or currency, the wholesale CBDC is testing the settlement among banks.

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CBDC for cross-border; UPI powers domestic payments

The Unified Payments Interface (UPI) has transformed the payments landscape, enabling the transfer of payments in real time and efficiently from one account to another across banks. Nearly 85% of digital payments in India are processed using UPI, with approximately 20 billion transactions occurring each month, amounting to a total value of more than $280 billion.

“UPI is a powerful catalyst, accelerating financial inclusion. Small vendors and micro enterprises can now accept payments digitally, and build financial history, thereby enabling access to formal credit at much lower costs,” Malhotra said.

“There are other benefits, too. A recent research study on the impact of UPI suggests that higher UPI adoption is associated with lower cash demand. Another study shows that a one percent increase in UPI transaction volumes correlates with a 0.03 percent increase in GDP growth,” Malhotra pointed out.

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For collaboration in digital payments, Malhotra informed that the RBI has adopted three strategic approaches. One, the central bank is linking UPI with fast payment systems of other countries for cross-border remittances.

“Linkage between India and Singapore (UPI-PayNow) is live. Work is under progress with a few other countries bilaterally as well as multilaterally,” he informed.

Second, RBI is enabling cross-border merchant (P2M) payments through UPI using QR codes at merchant locations in both offline and e-commerce modes. This functionality has already been launched in several countries, with efforts underway to expand it to additional markets.

Third, the RBI is assisting partner nations in establishing UPI-style sovereign payment systems or enhancing their existing infrastructures using the UPI technology framework, with agreements already in place for implementation in a few more countries, Malhotra informed.

UPI’s global expansion is accelerating at an unprecedented pace and is already live in eight countries, including the United Arab Emirates, Singapore, Qatar, Bhutan, Nepal, Sri Lanka, France, and Mauritius, with Canada likely to be considered next.

“These efforts will also promote cross-border trade and payments, while encouraging efficiency, improving customer experience, and reducing cost,” Malhotra added.

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Watch: India is going to be the frontrunner in digitalization

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