From Domestic Digital Cash to International Strategy
India’s central bank digital currency (CBDC), known as the e-rupee, is no longer just a domestic payment experiment. What began as a pilot to modernize retail and wholesale payments is now being examined as a tool that could reshape international financial flows.
Traditionally, global payments rely on correspondent banking networks and legacy systems tied heavily to intermediaries, a structure that often slows settlement, introduces high fees, and adds layers of foreign exchange conversion overhead.
Policymakers see in the e-rupee a chance to address those inefficiencies by building direct, digital settlement mechanisms between sovereign digital currencies, potentially cutting costs and settlement times for cross-border transactions.
Tackling Inefficient International Payments
One of India’s biggest pain points in global finance has been the cost and time associated with remittances and international trade settlements. The world’s second-largest remittance recipient faces fees that often exceed those in developed markets. Alternative inflation data from officials and analysts suggests that existing transfer systems are slow, costly, and opaque.
India’s e-rupee, backed by the Reserve Bank of India (RBI) and featuring direct, final settlement without intermediaries, could streamline these processes. By enabling direct transfers between digital wallets or via interoperable CBDC corridors, the e-rupee aims to reduce friction, speed up payment cycles, and lower cross-border transfer costs significantly.
Officials have suggested that cross-border CBDC use could cut remittance costs to as little as 2–3 percent, a marked reduction from current averages in many corridors.
Strategic Economic Aims Beyond Costs
Beyond remittances and settlement inefficiencies, India’s push to take the e-rupee global is also rooted in a larger economic strategy:
Simplifying Trade and Tourism Settlements
Linking the e-rupee with other countries’ digital currencies, especially among BRICS and regional partners, could streamline trade and tourism payments. This approach would bypass intermediaries and foreign exchange conversion steps, leading to faster and cheaper settlement cycles.
Enhancing the Rupee’s Global Role
India has long wanted the rupee to play a larger part in international transactions. The e-rupee’s digital design can make it more efficient for use in cross-border finance, without framing the effort as outright de-dollarization. Expanding global acceptance of the rupee through interoperable digital currency mechanisms could elevate its status in regional and international commerce.
Offering a Regulated Alternative to Private Stablecoins
While global stablecoins have gained traction in cross-border payments, regulators often point to the risks they pose without sovereign backing or oversight. The e-rupee provides a regulated CBDC alternative that reduces systemic risk and preserves monetary sovereignty.
How Cross-Border Use Could Work
Experts have sketched several potential models for enabling seamless cross-border operations with the e-rupee:
Bilateral CBDC corridors between two central banks with agreed conversion and compliance frameworks.
Multilateral platforms linking multiple CBDCs with common protocols, similar to early cross-border projects among major economies.
Integration with domestic payment networks like India’s Unified Payments Interface (UPI) that combine CBDC settlement with real-time transfer rails.
Each model requires harmonization of technology stacks, AML/CFT compliance, dispute mechanisms, and settlement systems—a complex but essential task for operational success.
Barriers to Global Interoperability
Despite its promise, cross-border CBDC integration faces real challenges. Countries must align on governance structures, regulatory standards, technology protocols, and mechanisms to handle imbalances where one digital currency accumulates more holdings than another. Geopolitical considerations such as how this affects reliance on dominant currencies like the U.S. dollar also play a role.
Additionally, successful pilots and agreements will need to ensure compliance across AML and counter-terrorism frameworks, along with effective dispute resolution mechanisms, before broad adoption becomes viable.
A Vision for the Future of Money
India’s interest in taking the e-rupee beyond domestic borders reflects a broader vision: modernizing global payments infrastructure, expanding the rupee’s reach, and offering a regulated, sovereign alternative to private digital currencies. While technical, legal, and geopolitical hurdles remain, ongoing pilot efforts and strategic conversations hint at a future where CBDCs become central to international payments, not just domestic digital cash.
