The Reserve Bank said on Friday it will start the pilot launch of e- for specific use cases with the intention of bolstering India's digital economy, making payment systems more efficient and checking money laundering.
The RBI said in a concept note on Central Bank Digital Currency, CBDC is intended to complement, rather than replace existing forms of money, and is intended to provide additional payment avenue to users, not replace existing payment systems.
Is the Digital e supported by state-of-the-art payment systems in India that are affordable, accessible, convenient, efficient, safe and secure? The paper said that the system will make India's digital economy more efficient, make the monetary and payment systems more efficient and contribute to financial inclusion.
CBDC is a digital form of currency notes issued by a central bank. While most central banks across the globe are exploring the issue of CBDC, the motivations for its issuance are specific to each country's unique requirements.
The Government of India has announced the launch of the Digital -- a Central Bank CBDC from fiscal year 2022 -- 23 onwards in the Union Budget placed in Parliament on February 1, 2022.
The central bank said that the Reserve Bank will soon begin pilot launches of e. For specific use cases. As the extent and scope of the pilot launches expands, RBI will continue to communicate about the specific features and benefits of e-rupee from time to time. CBDC can be classified into two broad types - general purpose or retail CBDC-R and wholesale CBDC-W Retail CBDC would be potentially available for use by all and wholesale CBDC would be designed for restricted access to select financial institutions.
The note says that CBDC needs to include all the features that the physical currency represents, including anonymity, universality, and finality, in order to play the role as a medium of exchange.
More than 60 central banks have expressed interest in CBDC, with a few implementations already under pilot across both Retail and Wholesale categories. Many others are researching, testing and launching their own CBDC framework, according to the note.
The concept note presents the background, motivation, choices of design features and other policy frameworks for the country's e-rupee system.
It said the aim is to build an open, inclusive, interoperable and innovative CBDC system that will meet the aspirations of the modern digital economy of India.
The paper stated that the potential impact on monetary policy from the introduction of CBDC is still unclear and purely speculative, given that only limited CBDCs are currently in existence, as few nations have issued till date.
After considering the concerns related to anonymity, appropriate analytics of Big Data generated from CBDC can assist in evidence-based policy making.
It may become a rich source of data for service providers for financial product insights. It said that the data would be useful for enforcing money laundering regulations.
The RBI said that the purpose of the issue of this concept note was to make awareness about CBDCs in general and the planned features of the digital rupee.
The note seeks to explain the approach of the Reserve Bank towards the introduction of the digital rupee.
The approach of the Reserve Bank is governed by two basic considerations: to make a digital rupee that is as close as possible to a paper currency and to manage the process of introducing a digital rupee in a seamless manner.