The Digital Rupee

The Reserve Bank of India’s (RBI) concept note on central bank digital currency (CBDC) and its plans to start pilot launches of this digital form of currency notes is an inflexion point in the financial sector. This is because CBDCs will substantially change the very nature of money and its functions. It will also redefine the financial landscape of the economy and alter the ways of conducting monetary policy. In short, it is a game changer that will significantly alter the financial landscape even more substantially than the introduction of credit and debit cards in the 1950s.

A major attribute of the CBDC is its offline features that would make it possible to use it in remote locations and even when electrical power or mobile networks are not available. This offers great potential for reducing payment costs and reaching banking facilities to the disadvantaged and the unbanked. The offline functionality can also gather digital footprints of the unbanked population and help ensure easier delivery of credit. Thus, the CBDC can provide a major boost to the efforts to facilitate financial inclusion and give a major fillip to economic activities.