The Reserve Bank of India said Friday it is looking at the pros and cons of introducing a virtual currency to the country. It will take a tiered approach to the launch of the central bank’s digital currency.
Finance Minister Nirmala Sitharaman had announced during the 2022-23 budget presentation that the central bank would launch an Indian digital currency.
The introduction of CBDC (Central Bank Digital Currency) was announced in the Union Budget 2022-23. An appropriate amendment to the RBI Act, 1934, is included in the Finance Bill, 2022, RBI said in its annual report for 2021-22 released Friday.
The Finance Bill, 2022, has been passed and provides a legal framework for the launch of CBDC.
“The Reserve Bank is in the process of introducing a central bank digital currency in India. The design of CBDC should be in line with the stated objectives of monetary policy, financial stability and efficient operations of currency and payment systems,” it said in the report.
The Reserve Bank has looked at the pros and cons of the introduction of CBDC in India and adds that it is proposing to take a tiered approach to the introduction of CBDC, step-by-step through the proof-of- concept pilots and launch.
Proof of concept refers to an exercise in which the work is aimed at determining whether an idea can be turned into reality or to verify whether the idea will function as intended.
RBI said CBDC’s design should be consistent with the “stated objectives of monetary policy, financial stability” and “efficient operations of currency and payment systems.”
Accordingly, appropriate design elements of CBDCs that can be implemented with little or no disruption are being explored, the report said.
After the budget announcement on Feb. 1, RBI Governor Shaktikanta Das said the Reserve Bank does not want to rush and carefully examine all aspects before introducing the CBDC.