India’s central bank is adopting a cautious stance on the rollout of its central bank digital currency, emphasising the importance of thoroughly assessing its potential effects before broadening its implementation.
Speaking at a conference in Cebu, Philippines, Deputy Governor T. Rabi Sankar underscored the transformative potential of CBDCs for cross-border payments, trade settlements, and remittances. However, he cautioned that risks remain as the full implications of the technology have yet to be fully understood
“We are not rushing to launch it right away. Once we have a clearer understanding of its outcomes and impact, we will proceed with the rollout. There is no fixed timeline for that,”
Sankar said, according to Bloomberg.
The Reserve Bank of India (RBI) introduced the e-rupee, a tokenized version of its fiat currency, in December 2022. However, adoption has been slow, with only 1 million retail transactions reported by mid-2024. This lag has been partially attributed to limited incentives from local banks, although some have started initiatives like using the e-rupee for salary distributions to boost its adoption.
The cautious approach aligns with earlier comments from Reserve Bank of India Governor Shaktikanta Das. In October, Das highlighted the CBDC’s potential to reduce costs and time for international money transfers, offering particular benefits to developing economies. He contrasted the Digital Rupee with cryptocurrencies like Bitcoin and Ethereum, noting its stability and ability to modernize global financial systems while maintaining regulatory oversight.
Deputy Governor Michael Debabrata Patra also expressed reservations in August, citing concerns about the risks CBDCs could pose to banking stability. He warned that in times of financial crises, CBDCs might be seen as “safe havens,” potentially leading to mass withdrawals from traditional bank deposits and even “bank runs.” Patra also raised questions about their impact on bank deposits and the deposit insurance framework.
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