The digital rupee will appear as a liability on the RBI’s balance sheet. (Representative)
New Delhi:
The retail digital rupee makes its debut today. As four banks selected by the Reserve Bank of India (RBI) prepare for the pilot launch of digital rupee, here are 10 important points you need to know about the digital currency.
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Digital Rupee or Central Bank Digital Currency (CBDC) is similar to fiat currency i.e. sovereign currency
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The difference between CBDCs and private virtual currencies is that the latter are not backed by any asset.
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CBDCs help avoid harmful consequences of private currencies, according to RBI
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The digital rupee will appear as a liability on the RBI’s balance sheet, which means it will be a part of the currency in circulation.
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CBDCs score higher than other digital payment systems such as UPI (Unified Payments Interface) as they reduce settlement risk
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In future, an Indian importer may be able to make digital currency payments to an American exporter on a real-time basis if both countries approve the use of digital currencies. In such cases, there shall be no arbitrator and any settlement shall be final; Time zone difference will no longer matter
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Anuj Kakkar, co-founder, Neobank Freeo, says digital rupee will have many benefits like reduction in losses and transaction costs, better transparency in money movement, etc.
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Programmable payments, cross-border payments with lower cost of currency printing and management, and enhanced security could be some of the key benefits, says Mihir Gandhi, Partner and Leader – Payments Transformation, PwC India.
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On the risk front, if the digital rupee is accepted by a large section of the population over time, banks may lose deposits, which may impact their ability to lend.
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Cash withdrawals are easier with CBDCs and hence flight of deposits is a risk for banks
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