-

 RBI e₹ (Digital Rupee)– Key Motivations for India’s own CBDC

         

          In the concept paper for India’s own CBDC, the Reserve Bank of India has highlighted the Key Motivations for the same.

          Key Motivations are goalposts guiding toward the final goal. The ultimate goal is the launch of Safe e₹ (Digital Rupee).



CBDC, being a sovereign currency, holds unique advantages of central bank money viz.

·       trust,

·       safety,

·       liquidity,

·       settlement finality

·       and integrity.

All the above will encourage our country folks, to quickly adopt e₹ (Digital Rupee) in their day-to-day activities

Liquidity denotes that the holders of e₹ (Digital Rupee), can exchange e₹ (Digital Rupee) for other commodities as per their requirement.

The settlement finality means once the entry reflects in the holder’s wallet / bank account (whatever name is finally decided), the ER belongs to the holder only.  

The key motivations for exploring the issuance of CBDC in India among others: -

·       include reduction in operational costs involved in physical cash management,

·       fostering financial inclusion,

·       bringing resilience,

·       efficiency, and innovation in payments system,

·       adding efficiency to the settlement system,

·       boosting innovation in cross-border payments space

·       and providing public with uses that any private virtual currencies can provide, without the associated risks.

As per current data, the operational costs associated with physical cash management are high as compared to costs associated with digital cash management. e₹ (Digital Rupee)  is expected to reduce such operating costs.

         

          In spite of multiple ePayment options in India, still cash is preferred in multiple scenarios. There are various reasons for the same. e₹ (Digital Rupee) are expected to increase the trust level in digital transactions and replace cash in various scenarios.

And, to provide the public with uses that any private virtual currencies can provide, without the associated risks, is the biggest motivator of all.

In the long run, CBDCs are expected to provide the public with the benefits of virtual currencies while ensuring consumer protection by avoiding the damaging social and economic consequences of private virtual currencies.

          In the near future, pilot studies are planned to be conducted amongst a closed user group to observe the CBDCs functioning in the real world.

          As the closed user group transacts more and more in e₹ (Digital Rupee), RBI can fine-tune ERs before expanding the numbers in the user group. Hopefully, the lucky few in the closed user group will transact more and more in e₹ (Digital Rupee), rather than physical cash.

Additional Reading: Reserve Bank of India Press Release dt.Oct 07, 2022 - Issuance of Concept Note on Central Bank Digital Currency @ https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54510

 

Disclaimer: These are my personal views only. The bottom line is Safe ePayments. Nothing More – Nothing Less.

I am solely responsible for any errors.

Copyrights belong to the original copyright holder only.

Comments

Post a Comment

Popular posts from this blog

CERTIFICATE EXAMINATION IN INTERNATIONAL TRADE FINANCE

-
Image
          This certification is essential for all members of a Bank Trade Finance Department.   The syllabus covers key aspects required by team members to effectively discharge their duties. Trade Finance is one of the traditional forms of bank finance in India. In view of reforms and liberalisation, this has gained a new significance.   Many of the practices in trade finance have evolved over a period of time and some are guided by Ministry of Commerce and Reserve Bank of India, besides WTO and International Chamber of Commerce through UCPDC 600. With the increase in the volume of trade both domestically and internationally, there is a need for trade finance professionals from banks as well as corporates. The Objectives of this IIBF Examination is as under:   (i) To provide candidates with competencies required to function as trade finance practitioners. (ii) To enable candidates to possess the ...
Read more

IIBF-Certificate Examination in Foreign Exchange Facilities for Individuals

-
          The primary objective this IIBF course is to make the branch officials familiar with the FEMA provisions that impact their day to day functioning at the branch level.     This exam is being introduced pursuant to the recommendation of a committee of RBI.           Normally foreign exchange transactions pertaining to individuals are handled at branches only and are not referred to specialised forex cells.           The course covers ‘Foreign Exchange Facilities for individuals under FEMA1999’ RBIs FAQs’ on Forex Facilities for Residents (Individuals) (updated up to November 21, 2014) For full details refer to Reserve Bank of India website: Introduction : The legal framework for administration of foreign exchange transactions in India is provided by the Foreign Exchange Management Act, 1999. Un...
Read more

IIBF introduces Self-Paced E-learning courses (SPeL) for its two certificates

-
Image
          Indian Institute of Banking Finance (IIBF) has taken a quantum leap in disseminating knowledge to its members and non-members.           IIBF in April 2019, introduced the Self-Paced E-learning courses (SPeL) concept for banking enthusiasts to be familiar with banking concepts.           In the first stage, IIBF has launched   two certificate courses i.e 1. Digital Banking and 2. Ethics in Banking.           The objective of this self-paced e-learning mode are as follows: • Participants can make the best use of his or her time, in order to meet his or her learning objectives. • Participants can access the course   anywhere/anytime with an internet connection. • Participants need not travel to give their examinations. It saves time and money of the participants. ...
Read more