RBI’s Pilot Digital Currency Launch To Happen in Q1 of FY23

The State Bank of India’s yearly Banking & Economic Conclave was held on 17th November. In this meeting, a senior central bank official has mentioned that the pilot launch of RBI’s Central Bank Digital Currency may happen in Q1 of FY23.

Earlier, a few central bank senior officials had mentioned that work related to CBDC was in an advanced stage; a soft launch could happen by December. However, there is no confirmation from the regulator on a firm timeline. The RBI Chief General Manager (CGM) has also mentioned that there need not be any hurry concerning CBDC.

1. Vasudevan, CGM of Payment and Settlement Systems, RBI, also mentioned that several issues concerning CBDC are being looked into. Based on how it is implemented, its usage can be determined.

As per CGM’s statement, the following are a few pointers that are still under discussion and are yet to be finalised:

• Should CBDC target the wholesale or the retail segment?
• For what kind of purposes, CBDC has to be used?
• How should the implementation of CBDC happen?
• Should CBDC follow a tiered model similar to what is being followed by banks for currency distribution?
• Checks are also being done to see if intermediaries can be avoided altogether.
• Should the technology be decentralised or semi-centralised?

CBDC would require a solid framework where banks can operate. The Unified Payments Interface (UPI) is steadily taking the place of cash to a large extent. Ideally, a  digital currency needs to function in an environment where the collaterals and information are also digitalised, which is not happening currently.

Most of the big central banks are already in the process of launching digital currencies. Also, digital currencies could bring down the cost of cash within the system remarkably and act as a catalyst concerning financial inclusion. The digital currency has become the need of the hour since the COVID-19 pandemic has drastically changed how banking works. Customers are now more inclined towards the ‘serve us what I need’ approach versus the bunched up services they were getting before the pandemic.

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