03/12/2022
Do you Know India has launced its own
It was launched yesterday in pilot scheme
It might be the next revolution in payments like UPI
What does it mean to you?
*Here is all about the Indian CBDC*
1/ What is CBDC?
CBDC stands a Central Bank Digital Currency
Just like a physical note, CBDC will be:
- Legal Tender
- Liability of the RBI to return us that money
- Our legal obligation to accept it
- Freely convertible against commercial bank money
Symbol: e₹
2/ Features of CBDC?
A. You won't need a bank account for transacting
B. Lower cost of issuance vis-a-vis notes
C. Negligible risk of being stolen or torn vis-a-vis notes
3/ How will it be different from UPI?
- No time required for settlement amongst banks
- No need of having a bank account
Hence, improving financial inclusion
- Substitute of cash
4/ Need for CBDC
A. Security over bank deposits
While our bank balances are insured up to ₹5Lakhs But since CBDC is CENTRALLY BACKED, it is the government's liability to return us each and every penny.
B. Reduction in cost associated with physical cash management
Govt incurred ₹4,984.80 Cr. for just printing money🤯
CBDCs will help in reducing cost of:
- Printing
- Storage
- Transportation
- Reconciliation (and delay)
- Settlement
AND Environment Friendly
C. No Settlement Risk
- In an online payments system, banks need to settle transactions amongst themselves
- CBDC will eliminate this by giving choices to market participants to choose among various settlement options
-Payments using CBDCs are final and reduce settlement risk
D. Improved Cross-Border Payments Scenario
India is the world’s largest recipient of remittances as it received $87 billion in 2021
- High costs
- Slow speed
- Limited access and
- Insufficient transparency
are some challenges which CBDC will endeavour to solve
E. Support Financial Inclusion
Despite measures taken like 'Jan Dhan Yojana' and UPI
our score at the Financial Inclusion Index is quite low
CBDCs will solve the problems like:
- Poor bank infra availability in remote areas,
- Poor connectivity etc
F. Ensure end-use utilisation
CBDC is programmable. The trail of money can be tracked
It will be easy for govt to ensure that subsidy released has not been siphoned-off and indeed used for the purpose intended
E.g. To track subsidy for fertilizer is used for its purchase only
G. Reduced Threats From Western Sanctions
Countries keep their foreign reserves in US Dollars and Gold Reserves
The West recently froze Russian assets held in such reserves will help us from such future sanctions
