The Reserve Bank of India (RBI) is reportedly deepening its involvement in the development of a Central Bank Digital Currency (CBDC).
According to the media reports, RBI is currently moving towards the ‘technological development’ stage of its planned CBDC, having completed initial research and examination into the feasibility of such a product. According to RBI’s annual report, the bank will now ‘explore the possibility as to whether there is a need for a digital version of fiat currency and in case there is, how to operationalise it.’
The move is part of a global trend for central banks that are exploring the benefits and challenges of digital currencies. This progression could potentially assist in reducing costs of minting physical currency and may increase the efficiency of monetary policy implementation.
However, as with many other central banks, the RBI is also mindful of the potential risks and challenges in implementing a CBDC, including issues relating to security, customer protection and data privacy. As such, it is expected that a considerable amount of research, testing and legislation will be required before a digital rupee becomes a reality.
This news is in line with RBI’s continued focus on more contemporary and disruptive financial technologies, as seen with their earlier interests in blockchain technology.