Instant money transfers between India and the UAE may soon become possible as the central banks of both countries are working to connect their sovereign digital currencies, The Mint reported, citing an expert familiar with the development.
According to the report, the proposed system could allow funds to move directly between digital wallets without the need for traditional banking channels.
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The development is very important because the UAE is one of the major sources of remittances to India and is home to more than four million Indians. By linking the digital currencies issued by the two central banks, cross-border transactions could become faster and more efficient.
How The Proposed System May Work
According to the report, the system would use central bank digital currencies (CBDCs) issued by both countries. Unlike conventional international money transfers that go through banks and payment intermediaries, CBDC transactions move directly from one digital wallet to another.
India's central bank, the Reserve Bank of India, has been running a pilot programme for its digital currency, the e-Rupee, for more than three years. Officials are reportedly also examining ways to connect it with foreign CBDC systems to make cross-border transfers faster.
“Take the example of a fintech that is present on both sides. When a user wants to send money, that fintech can debit the rupee CBDC account of the customer and transfer it to UAE,” the source was quoted as saying.
The UAE has also taken steps toward digital currency adoption. The Central Bank of the United Arab Emirates issued the first Digital Dirham as legal tender in 2024.
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Because the transfer would occur through digital currency wallets, the movement of funds could take place almost instantly.
About e-Rupee
The RBI launched the e-Rupee in 2022 and has been expanding its usage through pilot programmes.
Data from the central bank till December shows that more than eight million Indians are using the digital currency.
According to the report, during this period, about 120 million transactions were carried out through the system with a total value of Rs 28,000 crore.
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Why The UAE Link Is Important
The UAE is among the largest contributors to remittances sent to India. Though the United States has recently overtaken it as the top source of inward remittances, the UAE still accounts for around 19.2% of remittances flowing into India.
The UAE hosts a large Indian workforce.
Business ties between the two countries are also extensive. UAE-based companies such as LuLu Group, DP World and Emaar Properties operate large businesses in India, while Indian firms including Larsen & Toubro, Tata Group and Reliance Industries have significant operations in the UAE.
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