India’s central bank has proposed that the country start with a rudimentary version of its central bank digital currency (CBDC) and then upgrade to a more sophisticated form later. The Reserve Bank of India (RBI) claimed that this basic CBDC would provide a safe and convenient alternative to cash in its most recent report.
The paper, titled “Report on Trend and Progress of Banking in India,” examined the Indian banking sector’s growth in 2021 as well as its position in the global financial sphere.
On CBDCs, the central bank advocated a basic version of a digital rupee as a “secure, robust, and convenient substitute to physical cash,” according to the central bank. Users would benefit from this basic digital rupee in adoption, scalability, liquidity, speedier settlement, and anonymity in transactions.
Given its dynamic impact on macroeconomic policymaking, the bank stated that basic models should be adopted first and thoroughly tested to have minimum impact on monetary policy and the banking system.
The Reserve Bank of India has been working on a digital rupee while waiting for a bill to be passed that will allow it to be used by the general public. This measure will have two sides, one of which will prohibit the use of decentralized digital currencies such as Bitcoin, which it will refer to as “private cryptocurrencies.” The bill is expected to be delayed for months, if not years, as the Indian parliament focuses on the budget.
Despite growing uncertainties about the future of digital currencies in the country, the bank continues to pursue a digital rupee. While the RBI has made it plain that it supports a total ban, the government has been regarded as considering a compromise in which digital currencies would be regulated but not used as payment.