CBDC: Reserve Bank Of India Urges More Lenders To Embrace Digital Rupee, Sources Say

Mila July 12, 2023

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In an effort to enhance the adoption of the Central Bank Digital Currency (CBDC) and explore the potential of digital currencies, the Reserve Bank of India (RBI) has urged more lenders to participate in digital currency pilot programs.

With trials of the CBDC, known as e-rupees, already underway since last year, the RBI aims to achieve a target of one million CBDC transactions per day by the end of this year.

Pilot Program Expansion

Amid the ongoing pilot programs involving major state-owned and private lenders, such as State Bank of India, Bank of Baroda, ICICI Bank, HDFC Bank, Kotak Mahindra Bank, and Yes Bank, the RBI is now focused on involving smaller banks in the initiative.

During a recent meeting with RBI officials, technology heads of state-owned banks were advised to either collaborate with fintech players or develop their own systems to commence CBDC pilots this year.

The involvement of smaller banks in the CBDC pilot programs presents certain challenges as these banks will need to seek partnerships with fintech firms or allocate resources to build their own CBDC systems. The process of selecting interested fintech partners and evaluating the associated costs is also expected to take around 4-5 months.

According to an executive at a state-owned bank, while some banks have already advanced in submitting their CBDC pilot requests to the RBI, they anticipate receiving formal approval within the next 1-2 months.

Additionally, this broader involvement of banks in the pilot programs will allow the RBI to identify implementation glitches and conduct tests on a larger user base.

Benefits And Future Outlook

The adoption of a digital rupee holds the potential to change the Indian banking sector by providing an enhanced platform for conducting transactions.

In an era where digital currencies are gaining prominence worldwide, the Reserve Bank of India’s (RBI) proactive initiative to encourage greater participation from lenders reflects a forward-thinking approach that aligns with the global trend toward digitalization.

As the pilot programs gain momentum and more financial institutions join the movement, India inches closer to realizing the benefits of a digital currency. This transformation has the power to reshape the landscape of financial transactions, ushering in a new era of inclusivity and technological advancement.

By embracing a digital rupee, the Indian banking sector can offer payment options to individuals and businesses alike. Digital currency could enable efficient transactions, eliminating the complexities associated with traditional financial systems.

Furthermore, it opens up avenues for financial innovation, enabling the development of cutting-edge technologies and services. As the world witnesses a paradigm shift toward digital currencies, the RBI’s proactive approach positions India at the forefront of this transformative wave, positioning the nation to reap the rewards of a digitally-driven financial ecosystem.

Meanwhile, the global crypto market has surged 1% in the past 24 hours. With more than $10 billion added to the market valuation over the same period, the global crypto market currently sits at $1.157 trillion, at the time of writing.