Reserve Bank of India's (RBI) Deputy Governor T. Rabi Sankar has confirmed that the central bank will launch its digital currency, Central Bank Digital Currency (CBDC), as a pilot project this year.
Addressing the India Ideas Summit on Wednesday, he said that CBDC is the most efficient system for cross-border payments.
The RBI has also reportedly spoken to four public-sector banks, namely State Bank of India, Punjab National Bank, Union Bank of India, and Bank of Baroda to run the CBDC pilot internally, as per a Moneycontrol report earlier this week that cited two unnamed bank officials.
RBI is also reportedly consulting with several fintech companies on the digital rupee. Among them is the US-based firm FIS, which has been advising central banks on CBDC issues, such as offline and programmable payments, financial inclusion, and cross-border CBDC payments, the report said.
Earlier, Finance Minister Nirmala Sitharaman had announced in the Union Budget that CBDC would be launched in 2022-23. In May, the RBI said that it will adopt a “graded approach” to launching the digital rupee.
Meanwhile, RBI is advocating for a ban on all cryptocurrencies such as bitcoin and ether. Sankar said earlier this year that cryptocurrencies have “no underlying cash flows” and “no intrinsic value,” adding that “they are akin to Ponzi schemes, and may even be worse.” The central banker stressed, “Banning cryptocurrency is perhaps the most advisable choice open to India.”
At present over 7% of India's population owns digital currency, according to a recent report by the United Nations, which said that the use of cryptocurrency rose globally at an unprecedented rate in after the Covid-19 pandemic.
The recent cryptocurrency crash has made more people aware of the risks in dealing with them, and governments in many countries including India are concerned about misuse of cryptocurrencies in illegal activities such as drug trafficking and money laundering.
In his recent discussion, however, Sankar clarified that the RBI is “not aiming for a cashless society but is keen to give customers viable alternatives”.
Highlighting the growing significance of digital payments segment in the country, he noted that it was growing at the rate of 40% to 50% per annum and said that the Unified Payments Interface, or UPI, is likely to become more internationalised in the coming months.
The Deputy Governor further informed that RBI is trying to safeguard data privacy under the ambit of digital infrastructure. It is also reportedly working on scaling up technological stability of the digital payments infrastructure and focussing on scaling up fraud management.