In the annual report for the year 2021-22, the Reserve Bank of India has said it was proceeding to take the path of a “graded approach” towards the preliminary intro of the Central Bank Digital Currency.
It said that the structure of the central digital coin requires to be in line with the goals of its monetary policy, financial stability, and efficient operations of currency and payment systems.
The RBI’s statement came months after the time when the news of testing and running pilot projects paced up.
In the annual report, RBI said: “The Reserve Bank is committed to the introduction of a central bank digital currency (CBDC) in India. The design of CBDC requires to conform with the stated objectives of monetary policy, financial stability & efficient operations of currency and payment systems.”
The Reserve Bank proposes to embrace a graded technique for introducing the CBDC, going step by step through the phases of Proof of Concept, pilots, and the launch. Validation of concept is an exercise in which work is emphasized on analyzing whether an idea can be moved into reality or to confirm if the idea will function as expected. Moreover, the central bank said that RBI has been exploring the advantages and disadvantages of introducing CBDC in India.
A CBDC is a legal tender issued in digital form. Same as a fiat currency! It is easily exchangeable one-to-one with the fiat currency. Only its form is different. In its definition of CBDC last year, the RBI said that “CBDC is a virtual or digital currency, but it is not comparative to the private virtual currencies that have grown over the last decade.”
RBI’s Innovation Hub
The RBI Innovation Hub has a free Board with outstanding members from ambition and academia and has its headquarters in Bengaluru.
To develop innovation systematically and durably and through an institutional setting, the Reserve Bank Innovation Hub (RBIH) was arranged as a wholly-owned subsidiary of the Reserve Bank.
The Reserve Bank of India Hub will unite with financial sector institutions, industry, technology, and academic institutions. It will coordinate efforts to create an eco-system that would emphasize boosting allowing financial products and services, and would further financial inclusion.