Today the Governor of the Reserve Bank of India, Shri Shaktikanta Das, discussed progress with the digital rupee, saying he’s not in a rush. He confirmed the previously reported figure of five million users and 16 banks that are part of the central bank digital currency (CBDC) pilot, which started in late 2022.
“There should not be any rush to roll out systemwide CBDC before one acquires a comprehensive understanding of its impact on users, on monetary policy, on the financial system and on the broader economy,” said Governor Das. He noted these effects can only be assessed through more pilots.
He added that the “actual introduction of CBDC can be phased in gradually over a period of time. Undoubtedly, CBDC has the potential to underpin the payment systems of the future both for domestic payments and also cross border payment.”
The Governor discussed the more recent enhancements of offline payment and programmability, both of which could enhance financial inclusion. He also mentioned anonymity, presumably for small amounts.
CBDC use cases for financial inclusion
The Governor cited two examples. One is for purpose bound money linked to the generation of carbon credits from agriculture, which we previously covered.
The other use case he described also relates to agriculture. It’s challenging for tenant farmers to get loans for raw materials, because it’s tricky to prove that they are farmers given they don’t own the land. However, if the banks attach conditions to the usage of the cash, so that it can only be spent on fertilizer or other raw materials, then the banks get peace of mind and are more likely to grant credit.
Meanwhile, the central bank has various technology initiatives in progress. The latest is the Unified Lending Interface (ULI) aiming to provide a platform to make the granting of credit with minimal friction. The name is similar to its faster payment system, the Unified Payment Interface (UPI).
Notably, the BIS work on tokenization has had considerable input from India. Hence, naming its shared ledger work as a ‘Unified Ledger’ may or may not be a coincidence.
