Days after the government said the Reserve Bank will introduce a digital currency in 2022-23, Governor Shaktikanta Das said the central bank does not want to rush and is carefully examining all aspects before the introduction of the Central Bank Digital Currency (CBDC). He, however, declined to give any timeline for the launch of the CBDC.
In her Budget 2022-23 speech, Finance Minister Nirmala Sitharaman had announced that the RBI will introduce a digital currency in the next financial year beginning April 2022 to boost the digital economy and for more efficient currency management.
“This (CBDC) is one thing where we do not want to rush. We are carefully and cautiously examining and progressing ahead as there are multiple risks. The biggest risks are related to cyber security and the possibility of counterfeiting,” Das told reporters in a post-policy presser.
He said since CBDC is a new product, all the central banks which are working on it are very cautious..”I won’t spell out the timeline. We will progress as mentioned in the Budget 2022-23,” the Governor said.
RBI Deputy Governor T Rabi Sankar said once legislation is amended to enable the issuance of CBDCs, the RBI can try all the pilots and proofs of concept.
“Going ahead in this year, we will test the design features or technologies choices through proofs of concept and will introduce it,” he said.
A CBDC is a legal tender issued by a central bank in digital form. It is the same as a fiat currency and is exchangeable one-to-one with it.
While CBDC is a digital or virtual currency, it is not comparable to the private virtual currencies that have mushroomed over the last decade.
Sankar said the RBI is working on all models — wholesale and retail — for the introduction of CBDC.
He said the central bank is open to trying out all possible technologies for the virtual currency.
“So it is not one technology or the other, it will probably be whatever suits the case the best,” he said.
The Trend and Progress of Banking in India report, released by RBI in December last year, had said given the CBDC’s dynamic impact on macroeconomic policy making, it is necessary to adopt basic models initially, and test comprehensively so that it has minimal impact on monetary policy and the banking system.
India’s progress in payment systems will provide a useful backbone to make a state-of-the-art CBDC available to its citizens and financial institutions, it had said.