IN a move that will reshape the payment mechanism for businesses engaged in international trade, the Reserve Bank of India (RBI) has proposed expansion of its Real-Time Gross Settlement (RTGS) system to allow settlements in major trade currencies such as the US dollar, Euro and the British pound.
This far-reaching step could be achieved through bilateral or multilateral arrangements with other countries. The aim is to extend the reach of India’s RTGS system, which is already one of the few in large economies that operates 24/7, to handle transactions in major international currencies, potentially enhancing its role in global trade and finance. This expansion would build on existing efforts by India to link cross-border fast payment systems, improving international payment efficiency.
This radical measure was put forward by RBI Governor Shaktikanta Das in his keynote address at the RBI@90 High-Level Conference in New Delhi on October 14.
Governor Das also struck a note of caution on the unchecked adop- tion of artificial intelligence (AI) and machine learning (ML) in the banking sector, highlighting the associated risks such as market concentration, systemic instability, and heightened susceptibility to cyberattacks.
Das pointed out that India’s digital public infrastructure (DPI) has already positioned the country as a leader in digital innovation, supporting the development of high-quality financial products with significant cross-border payment potential. India’s startup ecosystem, which is among the most vibrant globally, is home to over 140,000 startups, more than 100 unicorns, and has attracted over $150 billion in funding. India’s experience in DPI can serve as a model for other countries to enhance their digital ecosystems and potentially revolu- tionise global digital finance.
He spoke about the growing potential of central bank digital currencies (CBDCs) for improving cross-border payments. India is one of the few countries to have introduced both wholesale and retail CBDCs, and ongoing experiments aim to enhance these systems with programmability, interoperability with UPI, and offline solutions for underserved populations.
While emphasising the need for caution in the growing use of AI technologies in financial institutions, the RBI chief warned that excessive reliance on AI could lead to concentration risks, particularly when only a few major technology providers dominate the market. If these dominant players face technical failures or disruptions, the impact could cascade across the entire financial system, amplifying systemic risks.
He noted that the increasing integration of AI opens new doors for cyber threats, making institutions more vulnerable to cyberattacks and data breaches. He called upon banks and financial institutions to adopt robust risk management measures to mitigate these potential dangers. “In the ultimate analysis, banks have to ride on the advantages of AI and Big Tech and not allow the latter to ride on them,” Das remarked, stressing the importance of maintaining control over technological advancements.
The Governor’s advice comes at a time when India’s digital payment landscape is primarily dominated by two major players — Google Pay and Walmart-owned PhonePe. These companies have ventured into loan distribution via their apps, making the reliance on tech giants more apparent in the financial ecosystem.
