RBI to introduce CBDC in a Graded Approach to ensure usage and results

Reserve Bank of India

The Reserve Bank of India (RBI) proposed its plans to adopt a graded approach in introducing central bank digital currency (CBDC) on Friday, May 27.

“The step-wise procedure for introducing CBDC would include stages of Proof of Concept, pilots and then, the launch.” stated RBI in its Annual Report 2021-2022.

The RBI has even been inspecting the advantages and disadvantages of the introduction of CBDC in India. The appropriate design elements of CBDCs that could be implemented with little or no disruption are currently under examination, said the central bank.

The CBDC project was announced during the Union Budget 2022 in February by Finance Minister Nirmala Sitharaman. He said that introducing CBDC would give a “big boost to the digital economy” and RBI would design the CBDC on its own.

A separate department was also launched by the RBI in 2021 called the Fintech Department that was focused on looking into the country’s CBDC project and its execution.

“The design of CBDC needs to be in conformity with the stated objectives of monetary policy, financial stability and efficient operations of currency and payment systems,” stressed the RBI in its latest annual report that it is engaged in the introduction of a CBDC in India.

CBDC is one of the many attempts by India to make a substantial mark in the digital payments economical sphere. The introduction of the Unified Payments Interface (UPI) has been a major boost. According to National Payments Corporation of India (NPCI) latest data, in April 2022 alone, 5.58 Bn transactions were carried out using UPI.

“The possibility of linking India’s payment systems to other jurisdictions, including the ongoing initiative of interlinking India’s fast payment system – UPI – with similar systems in other jurisdictions, will enhance cross-border payment arrangements, including remittances,” read the report.

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