The digital rupee would appear as a liability on RBI’s balance sheet.(Representational)
New Delhi:
The retail digital rupee makes its debut today. As the four banks selected by the Reserve Bank of India (RBI) gear up for the pilot launch of the digital rupee, here are 10 important points that you need to know about the digital currency
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Digital rupee or central bank digital currency (CBDC) is the same as fiat currency, i.e., sovereign currency
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The difference between CBDCs and private virtual currencies is that the latter is not backed by any assets
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CBDCs help avoid damaging consequences of private currencies, according to the RBI
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Digital rupee would appear as a liability on RBI’s balance sheet, which means it will be a part of currency in circulation
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CBDCs score over other digital payment systems such as UPI (unified payment interface) as they reduce settlement risk
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An Indian importer in the future may be able to pay an American exporter in digital currency on a real-time basis if both countries approve the use of digital currencies. In such cases, there would be no intermediaries and any settlement would be final; the time zone difference would no longer matter
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Digital rupee will have a slew of benefits such as reduction of losses and transaction costs, better transparency in money movement, etc, says Anuj Kacker, Co-Founder, Freo, a neobank.
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Programmable payments, cross-border payments with lower costs of printing and managing currency, and enhanced safety could be some of its key advantages, says Mihir Gandhi, Partner & Leader – Payment Transformation, PwC India.
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On the risk front, banks may lose deposits if the digital rupee gains acceptance by a significant mass of the population over time, which may impact their ability to lend
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Cash withdrawals are easy with CBDCs and therefore, the flight of deposits is a risk for banks
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