The Reserve Bank of India has released a concept note to create awareness about the central bank digital currency (CBDC) and the planned features of the digital rupee (e₹). It explains the objectives, choices, benefits, and risks of issuing a CBDC in India and also seeks to explain RBI’s approach towards it.
The RBI will soon commence pilot launches of e₹ for specific use cases. As the extent and scope of such pilot launches expand, RBI will continue to communicate about the specific features and benefits of e₹, from time to time.
The technical principle underlying the deployment of CBDC to achieve the intended objectives may include: i. Strong cybersecurity, technical stability and resilience. ii. Sound technical governance. DLT at this point of time, is not considered suitable technology except in very small jurisdictions, given the probable low volume of data throughput. However, DLT could be considered for the indirect or hybrid CBDC architecture. Further, it may also be possible that some layers of the CBDC tech stack can be on centralized system and remain on distributed networks.
The e₹ will provide an additional option to the currently available forms of money. It is substantially not different from banknotes, but being digital it is likely to be easier, faster and cheaper. It also has all the transactional benefits of other forms of digital money.
The note also discusses possible uses of the digital rupee, issuance mechanisms, and so on. It examines the implications of the introduction of CBDC on the banking system, monetary policy, and financial stability, and analyses privacy issues.
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