Reserve Bank of India’s CBDC Report


On October 7th, 2022, the Reserve Bank of India issued a Concept Note on a CBDC, whose purpose is to create awareness about the planned features of the Digital Rupee and the Reserve Bank of India’s approach towards its introduction. The main aim is to create a Digital Rupee that is as close as possible to a paper currency.

RBI defines CBDC (central bank digital currency) as “the legal tender issued by a central bank in a digital form. It is the same as a sovereign currency and is exchangeable one-to-one at par (1:1) with the fiat currency.

This initiative is motivated by the possibility of reduction in “operational costs involved in physical cash management, fostering financial inclusion, bringing resilience, efficiency, and innovation in payments system, adding efficiency to the settlement system, boosting innovation in cross-border payments space and providing public with uses that any private virtual currencies can provide, without the associated risks. The use of offline feature in CBDC would also be beneficial in remote locations and offer availability and resilience benefits when electrical power or mobile network is not available.”

Additionally, the RBI comments that this initiative is empowered as well by the negative impact of digital assets on India’s financial sector: “These digital assets undermine India’s financial and macroeconomic stability because of their negative consequences for the financial sector. Further, a wider proliferation of cryptocurrencies has the potential to diminish monetary authorities’ potential to determine and regulate monetary policy and the monetary system of the country which could pose serious challenge to the stability of the financial system of the country.”

The Digital Rupee aims to provide the same benefits as virtual currencies without the associated risks.

The report discusses various aspects of CBDCs in general tackling: design and technology choices, instrument design, degree of anonymity, features of CBDCs, motivations for issuance of CBDCs, and security concerns, among many other topics.

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