Image Credit: ANI News
Image Credit: ANI News

Reserve Bank Preparing to Introduce Digital Currency; Know how it will Work…

RBI Deputy Governor T Rabi Shankar said in a webinar of the Vidhi Center for Legal Policy that India also needs a digital currency.

The way of transactions is going to change soon in India. You are getting the option of Rs. If so, that too will be issued only by the Reserve Bank, but it will be completely different from the printed note. Not only the Reserve Bank but central banks around the world are working on digital currency as an alternative to private cryptocurrencies like bitcoin, Ether.

Last week, RBI Deputy Governor T Rabi Shankar said in a webinar of the Vidhi Center for Legal Policy that India also needs a digital currency. This will protect you from the loss caused by investing in a private virtual currency ie cryptocurrencies like bitcoin. At the same time, he also said that the Reserve Bank is working on it.

Let us know how different this digital rupee will be from currency notes? Can I invest in it like bitcoin? What will be the role of banks? How will this digital rupee be different from the digital payments we are making?

What is Central Bank Digital Currency (CBDC)?

It is an electronic form of cash. Just like you do cash transactions, you will also be able to do digital currency transactions. CBDCs work somewhat like cryptocurrencies (like bitcoin or ether). With this, the transaction is done without any intermediary or bank. You will get the digital currency from the Reserve Bank and it will reach to whomever you pay or transfer. Neither will go to any wallet nor to the bank account. Will work exactly like cash, but will be digital.

Why has the interest of central banks around the world in digital currency increased?

There are four big advantages of digital currency-

Efficiency: It is less expensive. Transactions can also happen faster. In comparison, the printing cost of currency notes, the transaction cost is also high.

Financial Inclusion: One does not need a bank account for digital currency. It can also be offline.

Prevention of corruption: The government will keep an eye on digital currency. Tracking of digital rupee will be possible, which is not possible with cash.

Monetary Policy: How much and when to issue Digital Rupee will be in the hands of the Reserve Bank. The excess or shortage of money in the market can be managed.

What is the work done by RBI on digital currency in India?

Digital currency is being talked about in India for two-three years. But the Reserve Bank has neither published any research nor launched any pilot project. The Reserve Bank of India's digital payments webpage states that alternatives to CBDCs are under investigation.

The problem is also that digital currency has not been issued on a large scale in any country. Pilot projects are also going on in China. Because of this, there is no model in front, which can be seen and worked on and adopted. China has stepped up efforts to patent the digital yuan.

Reserve Bank Governor Shaktikanta Das said a few days ago that we are working on digital currency, but there are challenges related to technological innovation. Financial stability also has to be looked at.

Recently the 2021 Cryptocurrency and Regulation of Official Digital Currency Bill has been issued. This is being called a big step towards India's digital rupee. But this bill only states the legal framework. The design planning and implementation process is not clear in this.

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