RBI to take 'graded approach' in introducing digital currency
India's central banking authority, the Reserve Bank of India (RBI), said in its annual report that it has been evaluating the pros and cons of introducing Central Bank Digital Currency (CBDC) in the country.
The Reserve Bank of India (RBI), in its annual report for 2022, said CBDCs (central bank digital currencies) will need a 'graded approach' through stages of development before being introduced in the country.
It rationalised that the design of the CBDC needs to conform with the "stated objectives of monetary policy, financial stability, and efficient operations of currency and payment systems", and hence needed a more gradual, step-by-step approach from the proof of concept stage, to the pilots and then the eventual launch.
In its latest annual report, the RBI added that the design elements of CBDCs that could be introduced with little or no disruption are under examination.
A CBDC is the virtual form of a government’s fiat currency, and is issued and regulated by local authorities. It is run on a digital ledger system, which may or may not be blockchain-based.
Union Finance Minister Nirmala Sitharaman (Image: Facebook)
The 'digital rupee' was first introduced by Finance Minister Nirmala Sitharaman in her Budget 2022 speech, saying it would provide a significant boost to the digital economy.
In support of CBDCs, the RBI has said that the digital rupee could prove useful in reducing settlement risk in the financial system, as well as eliminate the need for interbank settlement. As with most cryptocurrencies, the CBDC could also enable real-time and cost-effective global transactions.
Edited by Megha Reddy