RBI Recommends to Introduce Digital Currency Using a Graded Approach

The Reserve Bank of India (RBI) has announced its yearly report for 2021-22. India’s Central Bank Digital Currency (CBDC) has been one of the many topics discussed in the report. CBDCs are the digital version of fiat currencies; it would be the domestic currency rupee for India.

CBDC to operate with the help of blockchain and related technologies. CBDC, RBI’s central virtual currency, aims to help the central government undertake cost-effective and more efficient currency management steps.

RBI recommends introducing the Central Bank Digital Currency (CBDC) with the help of a graded approach in line with the aim of the monetary policy, financial stability, and systematic functioning of currency and payment systems.

RBI mentioned that it has been checking on the pros and cons of the CBDC introduction.  RBI has also been exploring the suitable CBDC design elements which can be implemented without much hassle.

The CBDC introduction was announced during the Union Budget 2022-23. Also, a relevant amendment to the RBI Act, 1934 has been added in the Finance Bill, 2022. The Finance Bill, 2022, has been approved, rendering a legal framework for the CBDC launch.

Finance Minister Nirmala Sitharaman announced that RBI plans to introduce digital currency in February during the Union Budget 2022-23.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in

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