Digital Rupee: Union Budget
Finance Minister Nirmala Sitharaman has announced the launch of the Digital Rupee — a central bank digital currency (CBDC) — 2022-23 onwards.
- The Reserve Bank of India will launch the CBDC from the upcoming financial year.
- A Central Bank Digital Currency (CBDC), or national digital currency, is simply the digital form of a country’s fiat currency.
- Instead of printing paper currency or minting coins, the central bank issues electronic tokens. This token value is backed by the full faith and credit of the government.
Four major use cases of CBDC in the Indian context:
- ‘Fit-for-purpose’ money used for social benefits and other targeted payments in a country. For such cases, the central bank can pay intended beneficiaries pre-programmed CBDC, which could be accepted only for a specific purpose.
- CBDCs could be used for faster cross-border remittance payments. International collaboration among the major economies of the world, including India, could help create the necessary infrastructure and arrangements for CBDC transfer and conversion.
- Payment instruments could be made available for payment transactions to be made via CBDC. Furthermore, universal access attributes of a CBDC could also include an offline payment functionality.
- Instant lending to micro, small, and medium enterprises (MSMEs) in India can be possible with the help of CBDC.