The process to implement the Central Bank Digital Currency (CBDC) in a phased manner for the wholesale and retail segments is in the works, an official of the Reserve Bank of India has said recently. The introduction of CBDC was announced in the Union Budget 2022-23, by finance minister Nirmala Sitharaman and necessary amendments to the relevant section of the RBI Act, 1934 has been made with the passage of the Finance Bill 2022, Ajay Kumar Choudhary, executive director (fintech) of the Reserve Bank of India (RBI) has said.
The RBI has been able to conduct a pilot and subsequent issuance of CBDC with the passage of the Finance Bill 2022, Choudhary said at an event on Wednesday. “RBI is also working on phased implementation of a central bank digital currency (CBDC) in both wholesale and retail segment,” Choudhary said while delivering a keynote address at the ‘PICUP Fintech Conference & Awards’ by FICCI.
CBDC is a digital or virtual currency but it is not comparable to the private virtual currencies or cryptocurrency that have mushroomed over the last decade. Private virtual currencies do not represent any person’s debt or liabilities as there is no issuer. India’s official digital currency is likely to debut by early 2023, which will mirror any of the currently available private company-operated electronic wallets. The CBDC will be a sovereign-backed digital currency.
In May this year, the RBI in its annual report had also said that it was going to take the path of a “graded approach” towards the introduction of the CBDC. It said that the design of the central digital coin needed to be in line with the objectives of its monetary policy, financial stability and efficient operations of currency and payment systems.
“The Reserve Bank is engaged in the introduction of a central bank digital currency (CBDC) in India. The design of CBDC needs to be in conformity with the stated objectives of monetary policy, financial stability and efficient operations of currency and payment systems,” said the Annual Report on the Working of the Reserve Bank of India 2022.
“The Reserve Bank proposes to adopt a graded approach to introduction of CBDC, going step by step through stages of Proof of Concept, pilots and the launch,” The RBI added in its annual report. A proof of concept is an exercise in which work is focused on determining whether an idea can be turned into a reality or to verify, if the idea will function as envisioned.
It also said at the time that the RBI had set up the Reserve Bank Innovation Hub (RBIH) to “foster innovation in a sustainable manner and through an institutional set-up”. The RBI Innovation Hub has an independent Board with eminent members from industry and academia and has its headquarters in Bengaluru.
(With PTI inputs)