Launch of Digital Currency by RBI

RBI has launched wholesale version of digital currency as a pilot project on 01st November 2022. RBI is expected to launch retail version of digital currency in a month time. Thus RBI becomes the world’s first central bank to start a pilot project with its own digital currency.

What is Digital Rupee?

The Central Bank Digital Currency (CBDC) also known as digital rupee is a digital form of currency notes issued by central bank. 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. Digital currency is akin to paper currency (the Indian rupee) and is exchangeable one to one with normal currency.

Versions of Digital Rupee

The RBI has proposed to issue two versions of Digital Rupee – general purpose or retail (CBDC-R) and wholesale (CBDC-W).

Wholesale Version- wholesale version of digital currency is launched on 01st November and will be used by large financial institutions, including banks, large non-banking finance companies and other big transaction institutions.

Retail Version- During 2nd phase RBI will launch retail version which can be used by people for everyday transactions. This will start at select locations and banks first. RBI is expected to launch retail version in a month time.

What are the advantages of CBDC?

CBDC will host all benefits that crypto currencies and digital payments offer.

RBI’s digital rupee cannot be damaged or lost physically.

Since CBDC will be governed by central authority, there are fewer risks involved in terms of volatility unlike other digital currencies. RBI believes that the digital rupee system will “bolster India’s digital economy, enhance financial inclusion, and make the monetary and payment systems more efficient. “CBDC is aimed to complement, rather than replace, current forms of money and is envisaged to provide an additional payment avenue to users, not to replace the existing payment systems