INSUBCONTINENT EXCLUSIVE:
Reserve Bank of India governor Shaktikanta Das (Photo: Shutterstock)4 min read Last Updated : Oct 14 2024 | 11:26 AM IST
With India being
one of the few large economies where there is a 24x7 real-time gross settlement system (RTGS), the feasibility of expanding RTGS to settle
transactions in major trade currencies, such as the US dollar, the euro, and the pound sterling, can be explored through bilateral or
multilateral arrangements, Shaktikanta Das, governor, Reserve Bank of India (RBI), said on Monday.
RTGS is an integrated payment and
continuous (real-time) settlement system developed by the RBI, whereby banks and financial institutions transfer funds (both for customers
and a few other economies have already begun efforts to expand the linkage of cross-border fast payment systems in both bilateral and
multilateral modes, the governor said, speaking at a high-level conference organised by the RBI in Delhi.
The RBI governor also highlighted
that remittances are the starting point for many emerging and developing economies, including India, to explore cross-border peer-to-peer
digital currencies (CBDCs) are another area with the potential to facilitate efficient cross-border payments
Unified Payments Interface (UPI) retail fast payment system, and development of offline solutions for remote areas and underserved segments
forward, harmonisation of standards and interoperability would be important for CBDCs for cross-border payments and to overcome the serious
financial stability concerns associated with cryptocurrencies.
Meanwhile, Das emphasised that in the modern world, with deep social media
penetration and vast access to online banking, where money transfers happen in seconds and rumours and misinformation can cause liquidity
stress, banks have to remain alert in the social media space and also strengthen their liquidity buffers.
He also highlighted that while
artificial intelligence (AI) and machine learning (ML) have opened new avenues of business and profit expansion for financial institutions,
these technologies also pose financial stability risks
Additionally, AI's opacity makes it difficult to audit or interpret the algorithms that drive decisions
financial institutions must implement adequate risk mitigation measures against all these risks
exchange rates, which may disrupt financial stability
This was evident during the sharp appreciation of the Japanese yen in early August, which led to disruptive reversals in the yen carry trade
and rattled financial markets across the globe.
Further, the private credit markets have expanded rapidly with limited regulation, posing
significant risks to financial stability, particularly since they have not been stress-tested in a downturn, Das warned.
He also noted that
higher interest rates, aimed at curbing inflationary pressures, have led to increased debt servicing costs, financial market volatility, and
The correction in commercial real estate (CRE) prices in some jurisdictions can put small and medium-sized banks under stress, given their
large exposures to this sector
warned.First Published: Oct 14 2024 | 11:25 AMIST
