Digital rupee: A new chapter in digital payments


India lagging in every technological advancement in the world is fast becoming a thing of the past. From ISRO to UPI, India is second only to China in this global playground.

The declaration of India’s own CBDC (Central Bank Digital Currency), the Digital Rupee in this year’s budget has concluded a debate surrounding this topic.

Another reason for excitement is that this would be issued using blockchain or any other technology.

That will boost the domestic advancement of blockchain and non-DLT stable technology. India will not have to wait for development in global standards to deploy CBDC, as India has already proved its mettle in digital payments.

The major competitor India will face in the CBDC game will be China. They have already released their CBDC, the Digital renminbi.

There are some countries from the Caribbean and Africa that have issued it. But it was because of gaps in the availability of digital payment instruments and a much higher degree of exclusion.

The objective of Digital Rupee is to reduce the usage of currency notes and in turn reduce the ever-increasing cost of printing banknotes and the logistical challenges circulating the same.

From the release of currency notes from Mysore and Salboni presses to distribution RBI supervises a long-complicated supply system. RBI also supervises the return of soiled and damaged currency notes.

But when the Indian GDP increases from $3 trillion to $5 trillion and per capita consumption rise, the demand for currency notes will also rise. This would severely affect the supply system. This could be avoided by necessary intervention.

Already soft currency instruments such as IMPS, UPI, NEFT, wallets, debit/credit/prepaid cards and NETC have questioned the need for CBDC. The rise in the number of soft money users also compounds the question.

But there persists a wide gap in active users of digital payments. Cases of cyber frauds in digital payments are also increasing. In such circumstances, CBDC and RBI intervention is necessary. Before it goes online, considering these steps would be good.

Finalise design options: The first matter to be addressed is to finalise design options. The simplest way of designing is by designing per the existing digital payments infrastructure.

As blockchain is still in its infancy, it would be better to start with conventional technology. That could be wallet accounts, and NPCI can remodel their planned on-device wallet for this purpose.

Widen acceptance: the next task is the most important of all, widen the acceptance infrastructure through massive awareness campaigns. It should reach such a manner even a local shop could accept it.

Digital payment literacy: Awareness campaign is not enough for digital adoption. Different approaches must be used to convert the unaware, fence-sitters and reluctant critics. This can be done through specially trained bank officials.

A research institution: This could support the growing technology and make India lead in this field.

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