The Reserve Bank of India which is India’s central bank has plans to launch a CBDC that can be exchanged for cash. It was reported that the bank was having conversations with financial tech solution companies, including US-based FIS, a fintech company that has been advising central banks on cbdc issues.
This was confirmed to local media by the company in a statement from the FIS senior director, Julia Demidova. Early this year, India’s finance minister, Nirmala Sitharaman, announced while presenting the federal budget 2022 in February that the RBI will issue a CBDC in this financial year.
Later in May, the central bank said that it will adopt a “graded approach” to launching the digital rupee in its annual report released in May. The report discussed CBDC among other topics.
It was stated that “The design of CBDC needs to conform to monetary policy, financial stability and efficient operations of currency and payment systems”.
The Reserve Bank proposes to adopt a graded approach to the introduction of CBDC, going step by step through stages of proof of concept, pilots, and the launch.
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In addition, the report revealed that the Central bank “has been exploring the pros and cons of [the] introduction of CBDC in India.”
Four banks have been chosen to run this pilot. The RBI has asked the State Bank of India, Punjab National Bank, Union Bank of India, and Bank of Baroda to run the pilot internally.
Indian Prime Minister Narendra Modi was quoted by local media as saying:
“The digital rupee will be the digital form of our physical rupee and will be regulated by the RBI. This will be such a system that will enable an exchange of physical currency with digital currency.”
The Prime Minister further emphasized that the Central bank’s digital currency will strengthen the digital economy and if anyone pays in digital currency, converting it to cash would be possible.
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