RBI Again Confirms India’s Own Digital Currency: To Be Rolled Out In Phased Manner (Check Full Details)
In its annual report released on Friday, May 27, the Reserve Bank of India said that towards the introduction of the Central Bank Digital Currency, it has planned to take a path of “graded approach”.
The design of the central digital coin must be in line with the objectives of its monetary policy, financial stability and efficient operations of currency and payment systems.
The RBI’s statement comes months after the time when it said it was in a position to start off with testing and running pilot projects of the CBDC.
Central Bank Digital Currency(CBDC)
The annual report on the Working of the Reserve Bank of India 2022 that the “The Reserve Bank is engaged in the introduction of a central bank digital currency (CBDC) in India. The design of CBDC needs to be in conformity with the stated objectives of monetary policy, financial stability and efficient operations of currency and payment systems”.
The RBI said in its annual report that the “The Reserve Bank proposes to adopt a graded approach to introduction of CBDC, going step by step through stages of Proof of Concept, pilots and the launch”.
A proof of concept is an exercise in which work is focused on determining whether an idea can be turned into a reality or to verify, if the idea will function as envisioned.
The central bank said that RBI has been exploring the pros and cons of introduction of CBDC in India. It said that the appropriate design elements of CBDCs that could be implemented with little, or no disruption are under examination.
In its annual report, RBI said that “The introduction of CBDC has been announced in the Union Budget 2022-23 and an appropriate amendment to the RBI Act, 1934 has been included in the Finance Bill, 2022. The Finance Bill, 2022 has been enacted, providing a legal framework for the launch of CBDC”.
Issued by central bank, a CBDC is a legal tender issued in the digital form. Same as a fiat currency, it is exchangeable one-to-one with the fiat currency. Only its form is different. In its definition of CBDC last year, the RBI said that “CBDC is a digital or virtual currency but it is not comparable to the private virtual currencies that have mushroomed over the last decade”.
It said that the Reserve Bank Innovation Hub (RBIH) was set-up as a wholly owned subsidiary of the Reserve Bank in order to foster innovation in a sustainable manner and through an institutional set-up.
The RBI Innovation Hub has an independent Board with eminent members from industry and academia and has its headquarters in Bengaluru.
The RBI hub will collaborate with financial sector institutions, technology, industry and academic institutions and will coordinate efforts for exchange of ideas and development of prototypes related to financial innovations for creating an eco-system that would focus on promoting access to financial services and products and would further financial inclusion. It would also develop the required internal infrastructure to promote FinTech research and facilitate engagement with innovators and start-ups.