Finance Minister, Nirmala Sitharaman had announced at India Today Budget Roundtable 2022 that the Reserve Bank of India will be launching its own digital rupee, a Central Bank Digital Currency (CBDC) in the financial year 2022-23. Further, she added that it will provide a significant boost to the digital economy.
CBDC is a digital token of a country’s official currency that is the same as currency issued by a central bank but not in paper form. It will be used as a medium of exchange, unit of account, store of value, and standard of deferred payment.
CBDC will provide significant benefits such as:
- It will lead to an efficient and cheaper currency management system.
- It will reduce dependency on cash as transactions will be digital.
- Owing to lower transaction costs, it will lead to higher seigniorage.
- Payments using CBDC will be final, thus it will reduce the settlement risk.
- Enable more real-time and cost-effective globalization of payment systems.
- CBDC will eliminate the need for interbank settlement.
- Time zone difference would no longer be an issue in currency settlements.
The digital rupee by the Reserve Bank of India will make payments more secure and transparent. It will offer an array of benefits to users in terms of liquidity, scalability, acceptance, ease of transactions with anonymity, and faster settlement.
