Bank Indonesia (BI) and Reserve Bank of India (RBI) have inked a memorandum of understanding (MoU) for closer co-operation in areas including fintech.
Signed on the sidelines of a G20 finance ministers and central bank governors meeting in Bali, the central banks of two of the four biggest countries in the world by population have pledged to work more closely together in payment systems and digital financial innovation.
The MoU – which will be implemented through ‘policy dialogue, technical co-operation, exchange of information and joint-work’, according to a press release issued the same day by both central banks – also includes closer co-operation related to anti-money laundering (AML) and combating the financing of terrorism (CFT).
The MoU will ‘provide a good basis for promoting mutual understanding, developing efficient payment systems and achieving cross-border payment connectivity’, according to their release. Initiatives will be implemented through ‘regular interaction’ on economic and financial developments and issues, training and joint seminars, and joint-work to ‘explore the establishment of cross-border retail payment linkages’.
The MoU was signed by BI deputy governor Dody Budi Waluyo and RBI deputy governor Michael Debabrata Patra in the presence of respective central bank governors Perry Warjiyo and Shaktikanta Das.
‘Significant milestone’: Warjiyo
Warjiyo referred to the MoU as a “significant milestone” in relations between the two central banks that would “ensure a more solid collaboration in the future”.
Das, meanwhile, described the agreement as a “step forward in putting our joint efforts within a formal mechanism”, adding that he hoped it would enable a “further deepening [of] our relations and facilitate our endeavour to make our financial systems accessible, inclusive and secure.”
The MoU is the latest to be signed by the BI with other central banks. For example it signed a similar arrangement with the Central Bank of the United Arab Emirates (UAE) in November last year and with the Bank of Korea in February this year.
Indonesia’s G20 presidency began in December last year and has been building towards the 17th G20 Heads of State and Government Summit, which will take place on 15-16 November in Bali. The 2023 and 2024 summits will be hosted by India and Brazil, respectively.
Bank Indonesia is currently running the third G20 TechSprint alongside the Bank for International Settlements (BIS) Innovation Hub. Twenty-one teams representing companies ranging from global corporations to fintechs were earlier this month shortlisted in the challenge, which is focused on developing new solutions in three areas related to central bank digital currency (CBDC). Shortlisted teams have until the end of August to complete their prototypes, which will then be judged by an independent expert panel convened by BI. Winners will be announced in October.
Five-way QR payments collaboration
BI is also one of five Southeast Asian central banks that have this month announced they are collaborating on a cross-border payments system that will enable residents of each country to use mobile-banking apps to make QR code-based payments when visiting the other nations.
BI, Bank of Thailand, Bangko Sentral ng Pilipinas, Bank Negara Malaysia and the Monetary Authority of Singapore (MAS) aim to sign an agreement to bring about such payments connectivity, which would be based on local currency settlement (LCS), later this year. BI previously talked up cross-border QR’s potential in February when it said it was working with Malaysia and Thailand’s central banks on cross-border QR pilots.
The five-nation plan was discussed by a panel of the five central banks’ governors convened by BI on 14 July as part of the Indonesian Digital Financial Economy Festival (FEKDI) 2022. BI issued a press release on the same day stating that ‘interoperability achieved through international cross-border cooperation must be strengthened’, with the broader aim being to ‘accelerate economic recovery and financial integration for the benefit of the community, especially MSMEs [micro-, small- and medium-sized enterprises], migrant workers and tourists’.
“During Indonesia’s G20 presidency, payment digitalisation and cross-border payments have become a priority agenda, with the G20 and FSB [Financial Stability Board] agreeing to expand cross-border initiatives through to 2027. Payment system interlinking is being developed comprehensively, including protocol harmonisation for data exchange as well as monitoring roadmap implementation,” BI’s Warjiyo stated in the press release.
Several nations in Southeast Asia already have bilateral co-operations on payments. For example, BI and Bank of Thailand launched a cross-border QR payment linkage pilot almost one year ago. The latter announced a similar QR payment linkage with Malaysia in June 2021, as well as co-announcing with MAS the breakthrough bilateral linkage of Thailand’s PromptPay and Singapore’s PayNow real-time retail payment systems in April last year.
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