implementation process Central bank digital currency (CBDC) in a phased manner for the wholesale and retail sectors in operation, official at the Reserve Bank of India recently said. Introduction of CBDC Announced in the Union Budget 2022-23, by Finance Minister Nirmala Sitharaman, the necessary amendments were made to the relevant section of the Reserve Bank of India Act 1934 with the passage of the Finance Act 2022, Ajay Kumar Chaudhry, CEO (fintech) at the RBI said (RBI).
Chaudhry said at an event on Wednesday that the RBI was able to conduct a trial and subsequent issuance of CBD with the passage of the Finance Bill 2022. While delivering a keynote address at the “PICUP Fintech Conference and Awards” by FICCI, Chaudhry said: “The RBI is also working on the gradual implementation of a Central Bank Digital Currency (CBDC) in both the wholesale and retail sector.”
CBDC is a digital or virtual currency but it cannot be compared to the private virtual currencies or cryptocurrencies that have proliferated over the past decade. Private virtual currencies do not represent the debts or liabilities of anyone as there is no issuer. An official digital currency is likely to appear in India by early 2023, which will mirror any of the privately managed e-wallets currently available. The central bank digital currency will be a sovereign-backed digital currency.
In May this year, the Reserve Bank of India also said in its annual report that it would take a “tiered approach” path towards the introduction of CBD. She said the design of a centralized digital currency should be in line with its monetary policy objectives, financial stability, efficient currency operations and payment systems.
The Reserve Bank is involved in the introduction of a Central Bank Digital Currency (CBDC) in India. The design of a central bank digital currency must be consistent with the stated goals of monetary policy, financial stability, efficient currency operations and payment systems.”
The Reserve Bank of India added in its annual report: “The Reserve Bank is proposing to adopt a tiered approach to the introduction of the central bank digital currency, moving step by step through the stages of proof-of-concept, beta and launch.” Proof of concept is an exercise in which work is focused on determining if the idea can be turned into reality or verified, if the idea will work as envisioned.
He also said at the time that the Reserve Bank of India had set up the Reserve Bank Innovation Center (RBIH) to “promote innovation in a sustainable manner and through institutional creation”. RBI Innovation Hub has an independent board of directors that includes prominent members of industry and academia and is headquartered in Bengaluru.
(with PTI input)