How will digital rupee rollout impact physical currency?
The Reserve Bank of India (RBI) has launched its pilot project on the Central Bank Digital Rupee (CBDC) starting, 1 November. Here's what the experts told CNBC TV18
Representative image. CNBC TV 18
The Reserve Bank of India (RBI) has launched its pilot project on the Central Bank Digital Rupee (CBDC) starting November 1. The pilot will see nine banks, including SBI, Bank of Baroda, HDFC Bank, Yes Bank, Kotak Mahindra Bank and ICICI Bank, settling secondary market transactions in government securities.
While there’s a lot of buzz on the same, it’s vital to see how the digital currency will be generated and if it would have any impact on the physical currency.
It is widely anticipated that the digital rupee ideated by RBI will be generated through an advanced payment system and aims at further bolstering the digital economy, said Rachit Chawla, CEO & Founder, Finway FSC while talking exclusively to CNBC-TV18.com.
“This payment system will be affordable, accessible, convenient, efficient, safe, and secure; making them a better and trusted option for financing in the future,” said Mahesh Shukla, CEO & Founder at PayMe.
On its impact on fiat currency, Chawla said the concept of initiating digital currency is only to complement the existing forms of financial transaction and not replacing them.
This means it will provide users with an additional option for making payments, while the existing payment system is still in place. It can be safely said that digital currency will have no effect on general currency usage.
Like physical currency notes, digital currencies can also be exchangeable.
Central Bank Digital Currency (CBDC) will be used to settle secondary market transactions in government securities and is expected to make the inter-bank market more efficient.
Further, hailing the move, Jaya Vaidhyanathan, CEO at BCT Digital, said the rollout of the CBDC has been one of the most sought-after developments since its announcement in the FY23 Union Budget.
“RBI’s commencement of the pilot of the digital rupee marks appreciable progress in the journey toward digital payments. While experts were wondering when India – the world’s fifth largest economy – would start in this regard, RBI as usual has not disappointed. A successful pilot and by extension, a full rollout of the digital rupee is expected to boost the reach of payment and financial needs of a wider category of users while ensuring transparency and low operational cost,” she said.
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