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Informist, Tuesday, Jul 16, 2024

 

--Source: Govt may nudge RBI to explore e-currency trade with Russia

--Source: RBI may fix threshold value for e-currency trade with Russia

By Krity Ambey

 

NEW DELHI – Efforts to boost bilateral trade with Russia have gained momentum after Prime Minister Narendra Modi's recent visit to Moscow. In this context, the government may nudge the Reserve Bank of India to explore the possibility of settling trade transactions with Russia using the respective central bank digital currencies, a senior government official said.

 

Last week, Modi went on a two-day trip to Moscow to attend the 22nd India-Russia bilateral summit. During the visit, he held two meetings with Russian President Vladimir Putin and both the leaders set a bilateral trade target of $100 bln by 2030.

 

The government had envisaged cross-border settlements using central bank digital currency two years ago, when the RBI launched the e-rupee pilot, the official told Informist. Russia had also shown willingness to settle cross-border transactions when its central bank had launched the e-rouble, the official said.

 

In view of the $100-bln trade target, this is an ideal time to explore settlement of trade transactions with Russia above a certain threshold value in digital currencies, the official said. The RBI and the finance ministry can together decide a suitable value for this, the official added.

 

The Central Bank of the Russian Federation launched the e-rouble in August 2023. India and Russia are among the 36 countries whose central banks have launched a pilot of digital currencies. Digital money issued by a central bank is denominated in the national unit of account. Digital currency in the retail segment can be used by the general public, while in the wholesale segment, it is for financial institutions. Wholesale central bank digital currency is similar to today's central bank reserves and is intended for settlement of large interbank payments.

 

In fact, cross-border payment was the most talked about use-case for the wholesale e-rupee before the launch of its pilot in November 2022. As of Mar 31, wholesale e-rupee worth 2.05 bln was in circulation, as per RBI data. In October, the central bank had also introduced a wholesale e-rupee pilot to facilitate inter-bank call money trade, in addition to the earlier use-case of government securities trade.

 

The Bank for International Settlements, in collaboration with Banque de France and Swiss National Bank, had studied the feasibility of the direct transfer of wholesale central bank digital currencies. They had explored the transfer of e-euro and e-Swiss franc between French and Swiss commercial banks. "This might pave the way for the broader and direct use of central bank money for cross-border financial transactions, contributing to safer and more efficient cross-border settlements and therefore to financial stability," Bank for International Settlements had said after the study. 

 

This is not the first time India and Russia are exploring alternative methods to settle trade. After Western nations imposed economic sanctions on Moscow and banned Russian banks from Society for Worldwide Interbank Financial Telecommunication, or SWIFT, in 2022, Russia and India tried settling trade in local currency through vostro accounts. 

 

Settling trade using respective digital bank currencies can also help the two sides tackle the difficulties arising on account of thr ban on Russian banks from SWIFT. For trade settlement in digital currencies, the government and the RBI are trying to develop a pilot that allows inter-bank communication as well, Economic Affairs Secretary Ajay Seth had said in July 2023.   

 

India's trade with Russia has risen significantly since 2022 after New Delhi started importing crude oil from Russia at a discounted price in the aftermath of the Ukraine war. India's import of crude oil from Russia jumped to over $40 bln in 2022-23 (Apr-Mar) from about $6.38 a year ago. In the last fiscal year, the total trade between the two countries was $65.69 bln, which included imports worth $61.43 bln.  End

 

US$1 = 83.59 rupees

 

Edited by Avishek Dutta

 

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