On Friday, the Reserve Bank of India (RBI) released a concept note on the planned launch of CBDC or digital rupee this year. It said a pilot project with specific use cases would be launched without giving a timeline. Indian Finance Minister Nirmala Sitharaman, in the annual budget for 2022-23, announced the introduction of Indian CBDC during the current financial year. On some occasions, she hinted that the digital rupee could be launched sometime this year itself.
“The purpose behind the issue of this Concept Note is to create awareness about CBDCs in general and the planned features of the Digital Rupee (e₹), in particular. It explains the objectives, choices, benefits, and risks of issuing a CBDC in India. The Note also seeks to explain the Reserve Bank’s approach towards the introduction of the CBDC,” a release from the RBI said.
In its annual report for 2021-22, RBI said that it would launch CBDC in a graded manner and would ensure that it doesn’t disrupt the existing payments and settlement system. The central bank also said that the digital rupee would follow the country’s economic and monetary policy.
“The Concept Note also discusses key considerations such as technology and design choices, possible uses of the Digital Rupee, issuance mechanisms, etc. It examines the implications of the introduction of CBDC on the banking system, monetary policy, financial stability, and analyses privacy issues,” the concept note released on Friday said.
Inspired by the belief that the introduction of CBDC would bring efficiency in some areas of banking by removing the need to deal with cash and ways to store and manage it, the Indian establishment was quite bullish on its CBDC project. But the central bank’s approach to the digital rupee has been cautious as it planned a graded adoption of the digital coin. Currently, the RBI is only planning to launch a pilot project for specific use cases.
“The Reserve Bank will soon commence pilot launches of e₹ for specific use cases. As the extent and scope of such pilot launches expand, RBI will continue to communicate about the specific features and benefits of e₹, from time to time,” the concept note said.
Earlier, the Indian government had planned to bring a cryptocurrency bill that would provide the legal framework to ban cryptocurrencies and launch official digital coins or CBDC. But while presenting the annual budget this year, the Indian government dealt with the two issues separately. While it announced to launch of CBDC by making amendments to the RBI Act, it did not make its stand clear on the legality of cryptocurrencies. Instead, it introduced a hefty 30% capital gains tax and a 1% transaction fee on all crypto transactions.