In a position to start testing, running pilot CBDC projects: RBI Deputy Governor

moneycontrol.com:

The Reserve Bank of India (RBI) is in a position to start off with testing and running pilot projects of Central Bank Digital Currency (CBDC) now that the legislative enablement has been done by the government, RBI Deputy Governor T. Rabi Shankar told reporters in a post monetary policy committee press conference on April 8.

This is in line with Finance Minister Nirmala Sitharaman’s Budget announcement that the RBI will launch CBDC in the present fiscal. CBDC is a digital form of fiat currency.

Addressing reporters today, Shankar said the approach that RBI will take towards CBDCs will be calibrated and nuanced. “We will probably start off with one pilot and move on from one to the other. The wholesale segment is probably the first one we will try out as it will be the easiest to implement. The other segments are more technology-intensive,” he said.

The regulator wants to ensure that it introduces CBDCs in a manner that is non-disruptive, he added.

Shankar’s comments come a day after he said that he believes CBDCs can replace cash-based transactions to some extent in India.

Over the last five years, while digital payments have risen at an average annual growth rate of about 50 percent in India, the supply of currency has also almost nearly doubled, Shankar said on April 7. The currency in circulation before demonetisation in 2016 was roughly about Rs 17 trillion and presently it is at about Rs 30 trillion.

Shankar cited a 2018-2019 RBI survey that showed that cash accounts for roughly 50 percent of all transactions in India and for transactions below Rs 500, the percentage goes up to 70 percent. Thus, CBDCs have a scope to replace cash to some extent, Shankar said.

The central bank deputy governor further said that 87 countries