- Date : 28/10/2023
- Read: 3 mins
The digital rupee has attractive features tailor-made to change international payments and remittances. Find out more about its fast and low-cost transfers.
Foreign exchange fees, regulatory costs, or delays in settlements – remitters and recipients have been facing many roadblocks when it comes to international payments. Technology has improved the turnaround time and costs in this regard in recent years. The Digital Rupee is expected to be the next chapter in the technological breakthroughs achieved in digital payment systems.
International wire transfers involve up to three intermediary banks that add to the costs
More intermediaries also mean more time, with up to 5 days needed
The digital rupee will make international transfer faster and cheaper and 24X7 available
What Is the Digital Rupee?
The Reserve Bank of India (RBI) has undertaken a pilot to introduce its Central Bank Digital Currency (CBDC). A legal tender in digital format, CBDC is also called digital rupee or e-rupee. It is being viewed as an alternate payment option and will be at par with the Indian national rupee in terms of valuation.
Globally, India joins several other countries that are part of a digital currency race. Notably, digital currency is also expected to stem the rising influence of cryptocurrency. One important card up its sleeve at this point is that while there are no taxes on the Digital Rupee, crypto transactions can attract a flat income tax of 30%.
Will the Digital Rupee Revolutionise International Payments?
The digital rupee will revolutionise cross-border payments in the years to come with its stellar features.
Fast payments – Payments can be made instantly with the likes of the digital rupee, as opposed to the multiple-day payment reflection in international wire transfers. Digital rupee transactions will be completed in reduced time despite factors like the location of the recipient, currency differences, taxes and compliance issues.
Fast settlements – Existing international payments are done through automated clearing houses and wire transfers that take up to several days for settlement. However, the use of blockchain-based wallets can lead to digital rupee transfers getting settled in real time, and 24X7.
Low cost – International remittances are an expensive affair, with transaction fees costing 1-3% of the transaction value. Digital rupee international transfers will bypass intermediaries like banks and payment processors, thus reducing transaction costs significantly.
Exchange rate difference – Continuous fluctuations in currency exchange rates are a common occurrence. Prolonged time taken in international payments means that there are always currency differences to settle, and a settlement risk as a result. The digital rupee does not assure a zero conversion rate, but can certainly reduce settlement risk.
The digital rupee aims to make overseas remittances and currency conversions instantaneous and economical. With the wider use of digital rupees, cash can be easily tracked in a non-invasive manner. Along the way, the government will save a fortune in currency printing and circulation costs too!
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