India-Indonesia to have real-time settlement, trading in local currencies

India and Indonesia are soon going to have real-time settlement and trading in local currencies, senior government officials said on Sunday on the sideline of G20 Finance Minister Central Bank Governors’ (FMCBG) meeting under India’s presidency. Once this happens, it will be the second country after UAE to have this kind of arrangement.

Another important development is that a synthesis paper on crypto regulation is likely to be taken up during the G20 Leadership Summit under India’s Presidency, scheduled to take place this September in New Delhi.

On Indonesia, the official said talks are currently on for trading and real time settlement in local currencies. “It will get done soon,” the official said. Earlier in the day, India and Indonesia launched the “Economic and Financial Dialogue” (EFD Dialogue).

Embarrassing digital tech

On this occasion, Indonesia Finance Minister Sri Mulyani Indrawati said that both countries would discuss the possibility of co-operation in digital technology, payment systems under central banks and using more local currency.

On Saturday, the Reserve Bank of India and the Central Bank of UAE (CBUAE) signed two memorandum of understandings (MoUs) for establishing a framework to promote the use of local currencies viz. the Indian rupee and the UAE Dirham for cross-border transactions and cooperation for interlinking their payment and messaging systems.  

Issues for FMCBG meeting

The official also informed that that G20 meetings under India’s presidency is trying to evolve a framework for crypto regulation through inputs from one and all. Earlier after Bengaluru meeting, it was decided that Financial Stability Board (FSB) will finalise its high-level recommendations on the regulation, supervision and oversight of global stablecoins, crypto-asset markets and activities. International Monetary Fund (IMF) has already come out with a discussion paper. Now “a synthesis paper will be circulated among member countries before leadership summit. The paper will be combination of reports by IMF and FSBs along with note from the Presidency,” the official said.

Crypto is one of four key issues of G20 meetings under India’s presidency. Other three includes Multilateral Development Bank (MDB) reforms, Debt & Sustainability Framework and Digital Public Infrastructure. All these four will be deliberated during FMCBG meeting starting on Monday.

Talking about MDB reforms, the official clarified that the effort is not to disturb the present arrangement of MDB such as the World Bank and IMF but to see if “they are ready for the 21st century.” Keeping this in mind, an expert group under the chairmanship of former Indian bureaucrat N K Singh and Professor Emeritus of Harvard University, Lawrence Summers was formed and it has submitted the report which will be taken up for discussion here.

On debt and sustainability framework, the official said that agreement has been reached for settling debt distress of Zambia but same mechanism cannot be applied for all. “One size cannot fit for middle income countries or low-income countries,” the official added. Further, India’s role in creating digital public infrastructure has widely been appreciated on G20 platform and this is likely to get further push.

When asked about the issuance of a communique post-FMCBG meeting here, the official was non-committal. The expression on the Russia-Ukraine war could not bring consensus on the communique at the Bengaluru edition of FMCBG which finally ended with the issuance of just chair summary.

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