RBI Governor Stresses Role of Central Banks in Ensuring Price and Financial Stability

The Governor of the Reserve Bank of India, Sanjay Malhotra, stated at an event on Tuesday that BRICS countries, including South Africa, are considering establishing links between their instant payment systems and central bank digital currencies.

The BRICS organization includes countries such as Brazil, Russia, India, China, and South Africa. India will host the annual summit in 2026. Malhotra noted in Mumbai that cross-border payments are of interest to all BRICS participants due to significant potential for cost reduction.

He added that several options are under consideration, including Central Bank Digital Currencies (CBDCs) and the interconnection of instant payment systems. Furthermore, the governor announced that the central bank will continue working on the internationalization of the rupee and promoting the use of local currencies for international trade and settlements.

Malhotra also emphasized that the Reserve Bank of India views Artificial Intelligence (AI) as a resource to be utilized, rather than merely a risk requiring containment. He called on creditors to inventory all AI models in use and develop board-approved AI governance policies, as Indian banks cannot remain passive.

Central banks worldwide are closely monitoring the use of AI by banks amid concerns over cyberattacks, as well as operational and governance risks. Malhotra stated that 'innovation and security are not opposing goals, but rather mutually complementary requirements for a resilient financial system.'

South Africa's Position

Malhotra outlined two possible directions, and South Africa has advanced further in one of them than the other. Regarding the interconnection of instant payment systems, the South African Reserve Bank is already undertaking this work, albeit through the Southern African Development Community (SADC) rather than through BRICS.

The BankservAfrica’s Transactions Cleared on an Immediate Basis platform allows payments between South Africa and Zambia within 60 seconds since 2024, with plans for future expansion of regional corridors. In July, the Angolan Kwanza became the second settlement currency accepted in the SADC real-time clearing system after its launch in 2013, joining the Rand.

The Governor of the Reserve Bank, Lesetja Kganyago, who heads the SADC Central Bank Committee, described this as a step towards achieving the G20 goal of faster and cheaper cross-border payments by 2027. Kganyago previously stated that instead of a common BRICS currency, BRICS central banks are working on the interconnectedness and compatibility of their national payment systems to simplify cross-border settlements.

Concerning digital currency, the Reserve Bank has been more cautious. Last year, it told TechCentral that a Rand-based CBDC could enhance efficiency and reduce costs in the SADC money transfer market if developed with compatibility and regional cooperation in mind, but it had not formed a formal position on retail CBDC use cases. The Reserve Bank remains cautious about a retail digital Rand currency, which says little about its readiness for wholesale CBDC agreements between central banks for settlements, which is a different instrument.