The deputy governor of the Reserve Bank of India (RBI) has revealed that the central bank is planning to launch a state-backed digital currency in phases so that it would have “little or no disruption to India’s banking or monetary systems.”
RBI Plans ‘Phased Implementation’ for Digital Rupee
- RBI Deputy Governor T. Rabi Sankar talked about India’s central bank digital currency (CBDC) at the Vidhi Centre for Legal Policy on Thursday, local media reported.
- He explained that the “RBI has been exploring the pros and cons of introduction of CBDCs since quite some time,” elaborating:
RBI is currently working towards a phased implementation strategy and examining use cases which could be implemented with little or no disruption to India’s banking or monetary systems.
- According to the central bank, a CBDC “is the same as a fiat currency and is exchangeable one-to-one with the fiat currency,” Sankar described, adding that “Only its form is different.”
- He noted that “Generally, countries have implemented specific-purpose CBDCs in the wholesale and retail segments,” emphasizing that “Going forward, after studying the impact of these models, launch of general-purpose CBDCs shall be evaluated.”
- The deputy governor further opined, “conducting pilots in wholesale and retail segments may be a possibility in near future.”
- Deputy Governor Sankar highlighted a few benefits of a central bank-backed digital currency. They include reducing dependency on cash, saving on the cost of money printing, and enhancing settlement mechanisms. Another benefit is the elimination of the “time zone difference” in foreign exchange transactions, which would result in a cheaper and smoother international settlement system.
- He also clarified that private cryptocurrencies, such as bitcoin, do not fit the RBI’s definition of currency and one of the reasons central banks worldwide, including India, are experimenting with CBDCs is to minimize the risks posed by cryptocurrencies on traditional financial systems.
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