Budget 2022-23 announced for rolling out digital rupee by Reserve Bank of India. Nirmala Sitharaman cleared the air around debates on whether India should bring a Central Bank Digital Currency (CBDC) or not? If yes; then when it should do it?
The indication that digital rupee/CBDC will use blockchain or related technology; shows that finally blockchain is becoming a mature technology. A mature technology is one that has been in use for long time and the faults and problems related to it have been greatly reduced. In digital payment structure RBI has earned a good reputation among Central Banks. Implementation of CBDC will provide an opportunity to RBI in developing global standards
CBDC is implemented on a national scale in China and it is only big economy in the world to do so. China had to do that because there was a lack of competitors in digital payments. Market of digital payment was dominated by two large players in China. Apart from China, there are few nations in Caribbean and Africa who have brought CBDC because of gaps in digital payment instruments.
The main objective of government in introducing digital rupee is to reduce the usage of currency notes. The cost of printing of currency notes are increasing due to demands. RBI also has to endure several logistics challenges. Currently currency notes gets printed in Mysore (Karnataka), Nasik (Maharashtra), Dewas (Madhya Pradesh) and Salboni (West Bengal). From there currency notes get distributed to public and private banks for distribution in the economy. The soiled currency notes that cannot be used anymore for transactions come to same presses for disposal.
State Bank of India, India’s leading public sector bank released a research note on digital rupee after Budget 2022 was announced. It said, “In comparison with existing forms of money, CBDC will offer several benefits related to scalability, liquidity, acceptance and faster settlement. The adoption of CBDC will improve and make it easier for people to use with the supporting infra provided by the government.”