Move carefully on CBDC

27 MAR,2022 | MEDC


 

In the Union Budget, the FM had proposed a digital rupee starting 2022-23, and stated that RBI would be issuing it, using blockchain and other technologies. The government believes that the Central Bank Digital Currency (CBDC) will give a boost to the country's financial system. While there is merit in this argument, there are also some systemic issues which need to be addressed. For example, where will the digital rupee be stored, whether such accounts could be interest bearing, who could hold how much, and how quickly the CBDC could be liquidated into regular rupee bank deposits. India is experimenting with a new (and potentially destabilizing) concept, and so there is no need to rush through it. All plans should be made public so that they could be widely debated before being executed. The operating framework for the CBDC should be carefully designed to ensure that lending rates in the economy do not rise, and a conducive environment is created for sustained growth of business activities, particularly smaller players.

*Picture Credit: Google

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