India’s Own Digital Currency

1. India’s Own Digital Currency With the advent of India's proposed digital rupee, nine private and state-owned banks are currently conducting interbank transactions using it. In contrast to banknotes and coins, the digital rupee is devoid of physical form, making transfers and settlements easier and more efficient. The Reserve Bank of India (RBI) described the new pilot as testing the digital rupee in the wholesale sector. According to RBI, the pilot relates to secondary market transactions in government securities. Using the digital rupee wholesale segment is expected to improve the efficiency of the interbank market. Digital currency in India can assist in creating a safer financial environment A total of nine banks are participating in the pilot. These include the State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and HSBC. Eventually, the digital rupee will be piloted in retail banking as well, for public use.

2. Digital rupee is not a cryptocurrency ? According to the Atlantic Council, a Washington-based think tank, fewer than a dozen countries have fully implemented a digital currency. In addition to Jamaica, China and the US are testing or preparing to launch their own versions of digital currencies. Currently, China is testing the digital yuan in 15 provinces before launching it nationwide. The country’s pilot is expected to run until 2023. The US’s digital dollar, however, is still being researched. E-rupees are very different from cryptocurrency, despite their purely digital existence, the RBI stated before the pilot program. It is difficult for any governing body to control a cryptocurrency. However, the Reserve Bank of India will issue and manage the digital rupee. Since cryptocurrency is centralized, the RBI can protect its financial stability against perceived threats posed by them.

3. Why do we need Digital Currency in India? 1. Reduced transaction costs: India's introduction of digital currency will result in lower transaction costs since customers can now pay directly to sellers, saving transactions and enabling real-time account settlements rather than waiting days for a payment to be cleared. 2. Assist in creating a safer financial environment: The government will be able to devise better budgets and economic plans in the future as a result of digital currency entering the market and increasing online transactions. 3. Physical Cash Management: According to RBI the cost associated with cash management has been on the rise year by year. A cumulative cost of Rs.4,984.80 crore was incurred from April 1, 2021, through March 31, 2022, compared with Rs.4,012.10 crore from April 1, 2020, through March 31, 2021. Due to the rollout of e-currency in India, operating costs such as printing, transportation, and storage will be reduced and the public will be spared from wearing out physical notes.

4. 4. Innovate cross-border payments The use of the RBI's Digital Currency will boost the innovation process of cross-border payments by making the transaction process fast, smooth, and instant by removing the challenges posed by time zones, legal requirements, and exchange rates. 5. Financial Inclusion: It is expected that this move by the RBI will provide a major boost to the process of financial inclusion by allowing people without bank accounts or Internet access to take advantage of digital currency transactions without having to have either.