UPI has given India an edge in the area of fintech and its overall impact on the economy. India’s proposed digital currency CBDC too is likely to be a groundbreaking initiative.
India is likely to get a digital currency in the near future. And if everything goes well, this digital currency too is likely to be a game changing initiative in the same manner as UPI has proven to be.
The Reserve Bank will soon commence limited pilot launches of e₹ for specific use cases.
The Reserve Bank of India (RBI) on Friday released a concept note on “Central Bank Digital Currency” that shows the intent of the central bank to make full use of digital currency opportunities for seamless transaction systems among financial institutions and merchants.
It is expected that this note would facilitate a deeper appreciation and understanding of digital Rupee and help members of the public prepare for its use.
The concept note was published on the website of the central bank, which said that it is trying to explore an alternate system for making payments and settlement in order to ensure faster processing and reduce dependency on cash.
The concept note comes at a time when the Indian government is considering banning cash transactions above Rs 3 lakhs. According to the note, the central bank is studying various models of digital currencies and also looking at how they can be used in India. “The Bank has been exploring the possibility of introducing a central bank digital currency (CBDC) as a case of a wholesale payment system,” it said.
The study of CBDCs is at an early stage and the concept note comes at a time when the Indian government is considering banning cash transactions above Rs 3 lakh.
The note said that a CBDC could be a digital form of the Indian rupee that can be used as a medium of exchange, unit of account and store of value.
It has also asked for feedback from stakeholders on how such a currency would impact financial inclusion, monetary policy transmission and the overall economy.
A CBDC can be issued by a central bank or a commercial bank and would be similar to a digital version of the Indian rupee that is used as an alternative to cash.
This means that the currency would be available in a digital format and could be used for transactions at merchant outlets or even peer-to-peer transfers.
The note said that a CBDC can help bridge the gap between cash and digital payments by providing an alternative medium of exchange for people who do not have access to banking services.
UPI has given India an edge in the area of fintech and its overall impact on the economy. Digital currency too is likely to be a pathbreaking initiative.
RBI’s CBDC will not be a cryptocurrency as the central bank still remains wary of the cryptocurrencies and the potential of their misuse.
However, the decision to use fintech for innovations in the way money is transacted is a welcome sign of things yet to come.
It is soothing to see Indian institutions think and act with a futuristic vision.
The fruits of such initiatives will certainly be reaped by the common masses in the times to come.
