RBI Concept Note on CBDC
On October 7 this year, the Reserve Bank of India launched a concept note to raise public awareness about central bank digital currency (CBDC).
- The recently released concept note discusses key considerations like technology and design choices, possible uses of digital rupee, issuance mechanisms and other such topics.
- The purpose of the concept note is to create awareness about CBDCs, especially the features of the Digital Rupee.
- It also provides explanation about the central bank’s approach towards the introduction of the CBDC.
- It also examinations the consequences of the introduction of CBDCs in the banking system, financial stability, monetary policy and individual privacy.
- The concept note highlighted the importance of a broad legal framework to support the issuance of the Digital Rupee as another form of Indian currency.
- It called for the amendment of the Reserve Bank of India (RBI) Act to include Digital Rupee in the definition of the term “bank note” and also insert a new section in the Act to encompass features concerning the CBDC along with the necessary exemptions.
- The design of the Digital Rupee will be decided based on the circumstances and need so that it is combatable with the goals of financial and monetary stability.
- The launch of the Digital Rupee will provide several benefits, like reduction in the cost of overall currency management, minimization of settlement risk as well as the reduced dependence on cash.
About Digital Rupee
The issuance of the e-rupee or digital rupee was announced by the Union Finance Minister Nirmala Sitharaman during the 2022 Budget. The central bank has proposed to issue two versions of the CBDC – wholesale for the interbank settlement and retail for public. This digital currency will be partially anonymous, which means that while small amounts will remain anonymous, the large amounts are not. The CBDC aims to promote innovation, reduce the transaction cost and boost financial inclusiveness.
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