The Reserve Bank of India (RBI) today announced that it expects to roll out the country’s own digital currency in this fiscal year. The deputy governor of the RBI said that the Central Bank Digital Currency (CBDC) would not impact India’s financial and banking systems. The CBDC, also known as the ‘digital Rupee’ was first presented in the Union Budget for the year 2022-23 by the finance minister with a subsequent amendment to the RBI Act 1934. The RBI will continue to research the design elements for the digital currency to weigh its pros and cons before making a final decision.
The idea of digital currency was introduced in India due to the rising investments in cryptocurrency and the absence of regulation. Many people across the country took to invest small as well as large sums of money in Bitcoin, Ethereum and other cryptocurrencies. However, the government has stuck to its decision to not recognise them as legal tenders.
What’s the CBDC?
According to a report by ETNow, the CBDC appears to be independent. It may not have any relation to the demands and price fluctuations of other cryptocurrencies. Termed as fiat or sovereign currency, it will be considered a legal tender or currency that can be used for payments. The digital Rupee can be exchanged only against the same currency.
A game-changer for digital payments
This may be too soon to predict, but the country’s central bank may just phase out older notes that are circulating within the country. It may also encourage citizens to move to digital currency wherever possible to reduce banks’ cash handling transactions.
Additionally, the RBI can also allow banks to easily integrate it with existing payment systems. So, imagine being able to keep a separate account with CBDC and another set of bank accounts with Rupee. While making payments through your favourite app, like Google Pay, you can choose to either pay with either one of the currencies.
This could also be an easy solution for the age-old issue of torn or worn out currencies that end up in our wallets. You could simply walk up to an ATM, indicate the denominations that you are exchanging for and receive the same amount of CBDC in your account.
