India: RBI Considering ‘Phased Introduction’ of Digital Rupee

India’s central bank is mulling launching a pilot program for a CBDC.

RBI Working Toward Phased Implementation of CBDC

The Reserve Bank of India (RBI) is contemplating kick-starting a “phased implementation strategy” for a central bank digital currency (CBDC), The Economic Times reports.

Specifically, RBI deputy governor – T Rabi Sankar recently said that a pilot to test a general-purpose digital currency could be a possibility in the near future.

Sankar noted:

“Every idea has to wait for its time. Perhaps the time for CBDC is nigh. It would be RBI’s endeavour, as we move forward in the direction of India’s CBDC, to take the necessary steps which would reiterate the leadership position of India in payment systems.”

Per sources close to the matter, RBI is already in the middle of framing numerous considerations on the scope and legal framework of the proposed CBDC. The sovereign digital currency will likely coexist with cash and digital forms of payments, the report reads.

Sankar went on to say:

“CBDC will be in the arsenal of most if not all central banks in the world. Setting this up will require careful calibration and a nuanced approach in implementation. Drawing board considerations and stakeholder consultations are important.”

Adding:

“However, conducting pilots in wholesale and retail segments may be a possibility in near future.”

CBDC to Be Legal Tender in India

The RBI deputy governor added that CBDC would be legal tender in the country should they see the day of light. He said the digital rupee would be the same as a fiat currency and exchangeable one-to-one with the fiat currency.

Sankar added there are multiple benefits to a CBDC including reducing dependence on cash, savings on the cost of printing currency, and enabling a more robust settlement mechanism. It would also help eliminate “time zone difference” in foreign exchange transactions thereby fostering a smoother international settlement system.

As previously reported by BTCManager, a new bill introduced in the Indian Parliament seeks to introduce a government-issued digital currency while simultaneously placing a blanket ban on ‘private cryptocurrencies’ such as bitcoin (BTC).

Interestingly, Sankar added that private virtual currencies such as BTC do not fit RBI’s definition of currency.