The Reserve Bank of India presents the CBDC model.

October 8, 2022

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The Reserve Bank of India presents the CBDC model. The Reserve Bank of India (RBI) is finalizing plans to launch a pilot phase of issuing its central bank’s digital currency, the ‘Digital Rupee’. The Reserve Bank of India released a concept paper on 7 October outlining its drivers, design options and technical considerations for the pilot phase of the CBD project. The Reserve Bank of India said the digital rupee will be designed to complement, not replace, India’s existing payment system. Although the digital rupee is no different from fiat money, it will be optimized for faster and cheaper settlements. The country’s apex bank explained that the issuance of a digital rupee will help the Indian economy reduce operational costs involved in physical cash management, improve the efficiency of payment settlements, and boost innovation in cross-border payments. With an offline feature expected in the CBDC, the RBI envisions that more people in remote areas limited by internet access would be able to access financial services, more efficiently.

The RBI added that the CBDC will enable the public to reap the full benefit of private cryptocurrencies without undermining the financial stability of the Indian economy. “It is the responsibility of the central bank to provide its citizens with a risk-free CBDC which will provide the users the same experience of dealing in currency in digital form, without any risks associated with private cryptocurrencies.” For design specifics, the RBI plans to issue both retail and wholesale CBDCs. The wholesale CBDC will be for interbank transfers, while the retail version will be for day-to-day use by the public.

Given that retail CBDC is a digital version of cash, the RBI said it could be issued as a token-based, while the wholesale CBDC would be issued as account-based. The RBI has not yet chosen between issuing a CBDC on a centrally managed database or distributed ledger technology. However, you will learn about options that provide cyber security, resilience, technical stability and stronger governance standards. The Reserve Bank of India said it will incorporate the results of the pilot phase into the final design of the digital rupee.

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