The Digital Currency of the Central Bank (CBDC) can replace cash-based transactions to a certain extent in India, Reserve Bank of India Deputy Governor of T. Rabi Shankar said in the Icrier Webinar on ‘get a central bank digital currency for India: lessons from the G20 and the rest of the world on April 7.
Over the past five years, while digital payments rose at an average annual growth rate of around 50% roughly in India, the supply of currencies almost almost doubled, said Shankar. Currency circulating before demonnetization in 2016 approximately around Rs 17 trillion and currently around Rs 30 trillion.
Shankar quoted the 2018-2019 RBI survey which showed that the cash account was around 50% of all transactions in India and for transactions under the RS 500, the percentage reached 70%. Thus, CBDC has a scope to replace cash to a certain extent, Shankar said.
Deputy Governor of the Central Bank further said that 87 countries globally, 90% accounting from world GDP, in several ways or the other, appeared active in CBDCs. These nations research, discuss, or launch pilots and some even go with these assets.
This is not a problem from the start, he said. The critics question the use of the CBDC which says it cannot serve a more unique purpose than a normal digital payment system. However, with the introduction of stable coins, the central bank has begun to provide the application of these assets serious thinking.
“Now with the appearance of stable coins, the problem of volatility goes out, and then the central bank sits and says there is a clear threat from the private currency and even worse if some private currencies will replace the official currency or fiat, I think that’s what causes activity activities At the central bank, “Shankar said.
Very large public participation in the world of Crypto can also make the government change their attitude around CBDC to a certain extent. “Now, this is a question about when than if most currencies,” Shankar said referring to the implementation of CBDCs.
Furthermore, convenience in cross-border transactions, settlements, cost efficiency, and financial inclusion are some of the other benefits of using CBDCs, Shankar said. However, to take advantage of this benefit, all countries must adopt CBDC, he scaly.
Finally, problems such as the effects of CBDC in the effectiveness of monetary policy, level transmission, currency leakage, and privacy and data protection are some of the challenges that need to be addressed while dealing with CBDC and thus RBI continues to advance with the implementation of the project, Shankar said.
