FROM TOI PRINT EDITION

Make haste slowly: Digital rupee can have many

implications for RBI. Best to take time over it, like
other countries
February 2, 2022, 7:46 PM IST / TOI Edit in TOI Editorials, Edit Page, India, Times View, TOI

Much interest has been generated by the Budget’s statement that RBI will issue digital rupees
during 2022-23. It’s a reiteration of a 2017 suggestion by GoI’s high-level inter-ministerial committee
that asked RBI to introduce its own central bank digital currency (CBDC). A CBDC is a digital form of
paper currency. Holders of CBDC can transfer money digitally instead of handing over currency notes.
TOI Edit
Globally, pilot projects on CBDC have been underway since 2014. However, progress is slow because
Times of India’s Edit
Page team comprises this seemingly simple innovation can have unforeseen consequences.
senior journalists with
wide-ranging interests
who debate and opine
India today is one of the 50 odd monetary jurisdictions with a digital retail payment system that runs
24/7 and transfers are near real time. RBI’s pilot survey on retail payments done in six cities over

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December 2018 and January 2019 showed that digital payments were catching on fast. While cash
of the day.
was the preferred mode of payment for transactions up to Rs 500, digital payments were more
popular for higher amounts. As digital payments have been growing at over 50% over the last five
years, the trend is clear. From a user’s standpoint, there is no real incentive to switch to a CBDC as a
growing proportion of retail transactions are already done digitally.

For RBI, however, a CBDC is not just another digital payment option. It has implications for the
banking system that are not entirely clear. If there is a partial shift away from bank deposits to CBDCs,
what are the implications for the role of banks in credit creation? By extension, what is the
implication for monetary policy? The disintermediation of banks by the central bank is an area that is
being closely scrutinised by the world’s leading central banks. One of them, Sweden’s Riksbank,
launched its e-krona project in 2017. It’s still studying both its need and potential impact on Sweden’s
economy.

The case here isn’t against the introduction of a CBDC. Rather, it is about the need to be flexible
about deadlines in this endeavour. CBDCs may be inevitable but the need for RBI to cover for all the
possible risks is non-negotiable. The timeline should be flexible.

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This piece appeared as an editorial opinion in the print edition of The Times of India.

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