Bangladesh is set to join the emerging Cross-Border Interbank Payment System (CIPS) that facilitates international transactions in currencies alternative to the US dollar, amid greenback crunch.

The up-and-coming Chinese-broached payment platform is a second global payment system the country is going to use after the US-dominated SWIFT (Society for Worldwide Interbank Financial Telecommunications) to make payment outside the country, said sources at Bangladesh Bank (BB), the country's central bank.

As part of the initiative, Chinese Ambassador in Bangladesh Yao Wen met BB governor Abdur Rouf Talukder Wednesday and discussed the matter.

The sources said the central bank was now considering the alternative payment option with "utmost priority" as it will help the country clear dues of Rooppur Nuclear Power Plant to Russia through China.

China has offered Bangladesh to be a part of the payment network soon after the global economic powerhouse launched the system, but Bangladesh, having faced problems in settling transactions with Russian banks following US sanctions on using SWIFT, decided to join in the Chinese-developed payment bloc.

Seeking anonymity, a BB official said a central bank's team early this month visited China and met top officials of the Chinese central bank where the visiting BB officials discussed Bangladesh's participation in CIPS.

"Bangladesh Bank has already opened a Nostro account with the central bank of People's Republic of China," he said.

Nostro account is a bank account that a bank holds with a foreign bank in the currency of the country where the funds are held.

Currently, a few banks have Nostro accounts with China but those are not used for payment as majority of foreign transactions are done in the American greenback.

The central banker also informed that the Chinese envoy very recently held discussions with the BB governor with the issue of joining CIPS figuring high.

Spokesperson for BB Md Mezbaul Haque says Chinese currency RMB has already become an official currency, which creates an opportunity of carrying out import and export directly with China-the largest trading partner of Bangladesh.

"So, now anyone can open LCs in Chinese currency Yuan and the decision comes so that both central banks can settle the transactions facilitating trade in Yuan," he adds.

Contacted, Chairman of Research and Policy Integration for Development (RAPID) Dr Mohammad Abdur Razzaque said the decision on becoming partner in alternative platforms like CIPS "is realistic and positive one as it will certainly lessen transaction costs".

"China is the largest trading nation of the world and joining in the payment system would encourage large chunk of Chinese outbound investment here in the form of importing capital machinery for their industrial production," he added.

Regarding settling the back pay to Russia through the platform, the trade economist notes that Bangladesh exports less to China and Russia rather than import. "So, settling big transactions like Rooppur Nuclear Power Plant would require huge stock of foreign currencies reserve, which remains a challenge."

As of December 2023, reports say, CIPS has 1484 participants

In 2022, CIPS processed around 96.7 trillion yuan or $14.03 trillion with about 1427 financial institutions in 109 countries and regions having connected to the system.