The Reserve Bank of India (RBI) on October 7 said it will soon commence pilot launches of digital rupee for specific use cases, without providing a definite timeline.
The RBI said this in a concept note on central bank digital currency (CBDC) aimed to create awareness about such currencies in general and the planned features of the Digital Rupee, in particular, according to a release. India's CBDC will be called 'e₹.'
In the concept note, the RBI said that CBDC will be an additional payment avenue to users, and is not aimed at replacing existing payment systems.
The digital rupee will further bolster India’s digital economy, make the monetary and payment systems more efficient and contribute to furthering financial inclusion, the RBI added.
CBDC is a currency that is backed by the regulator and stored in a digital format. It can be converted into paper currency and will reflect on the RBI’s balance sheet, thereby granting it legal tender status. India is aiming to launch its own central bank digital currency in this financial year that ends March 31, 2023.
The RBI's concept note aims to provide a high-level view of motivations for the introduction of CBDC in India, its potential design features, implications on various policy issues, and the possible requirements of a technology platform, said the regulator.
The concept note is an explainer on the CBDC’s technology, design choices, possible uses, and issuance mechanisms, among others. The note examined the implications of introduction of CBDC on the banking system, monetary policy, financial stability, and analyses privacy issues.
According to the RBI, CBDC, being a sovereign currency, holds unique advantages of central bank money, specially trust, safety, liquidity, settlement finality and integrity.
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, and innovation in payments system, and providing the public with uses that any private virtual currencies can provide, without the associated risks, the RBI said.