India’s central bank, the Reserve Bank of India (RBI), has signaled that it is in no rush to fully implement a central bank digital currency (CBDC), opting instead for a measured approach to assess its long-term implications.
During a recent conference in Cebu, Philippines, RBI Deputy Governor T. Rabi Sankar emphasized the importance of thoroughly evaluating the potential impacts of CBDCs before scaling up their usage. While recognizing the technology’s transformative potential for cross-border payments, trade settlements, and remittances, Sankar noted that significant risks remain due to the limited understanding of the full consequences of CBDC implementation.
“We are in no hurry to roll it out immediately,” Sankar said. “Once we have some visibility of what the outcome or impact will be, we’ll proceed with the rollout. We don’t have a specific timeline for that.”
India launched its central bank digital currency, the e-rupee, in December 2022. The tokenized version of India’s fiat currency has seen slow adoption, with approximately 1 million retail transactions reported by mid-2024. Adoption has been partially driven by incentives from local banks, including using the e-rupee for salary disbursements.
Despite the cautious pace, concerns over the risks of CBDCs have been raised within the RBI. In August 2024, Deputy Governor Michael Debabrata Patra warned that CBDCs could inadvertently destabilize banking systems by being perceived as “safe havens” during financial crises, potentially leading to a surge in withdrawals from traditional bank deposits and sparking bank runs. He also raised uncertainties regarding how CBDCs would interact with bank deposit systems and deposit insurance.
India’s approach to CBDCs reflects a growing recognition of their potential, but also an awareness of the need for careful consideration of the broader financial implications before widespread implementation.
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