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.
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