Private sector has decided to promote Digital Rupee. In partnership with Innoviti Technologies, ICICI Bank and Kotak Mahindra Bank, Reliance Retail has become the first retailer to accept Digital legal tender. Initially, the facility is available at Freshpik stores and will eventually expand to all retail stores. Its mechanism will be the same as we transfer money through QR code, except for the fact that banks won’t be an intermediary in transfer of digital Rupee.
Journey of Digital Rupee
Digital Rupee is a long-awaited project of the Indian government. Its need arose because of massive Internet expansion and advent of private cryptocurrencies. Chinese digital yuan works as another external impetus.
India’s advent into this Blockchain and Distributed ledger technology (DLT) led domain was announced in the Budget 2022 speech. To enable it as legal tender, Budget came up with a legal framework for CBDC. It took 8 months for RBI to commence the first pilot rollout of CBDC. Initially it was rolled out only in 4 big cities. After initial success, the pilot project was extended to 9 more cities.
Also read: India’s own digital currency is here
Cost-cutting, foreign trade and transparency
At the minute level, CBDC is nothing but our Rupee in digital form. Digitalising Rupee gives a plethora of advantages to both the public and government. For the government, it reduces the cost of printing money. Printing every ounce of currency involves expenditure worth anywhere between 8 crores to 10 crores. Then the cost of supplying makes having money an expensive business. Digital Currency brings down this cost significantly.
The digitalisation is a big boost to transparency. It makes bribe taking much more difficult. Even the record of transfer of Rs 1 worth of digital Rupee is available with RBI. With eventual de-cashification, the Prevention of Corruption act will get more teeth, just on the back of transparency and swiftness.
This swiftness is the reason why Digital Rupee is going to change foreign trade dynamics. Currently, you have to convert our rupee into dollars, and then send these dollars to the other party’s account. Then, the US federal reserve takes further time to settle it. It takes time and capital investment. With Digital Rupee, the time band for this process radically shortens. Even with the countries with which we are working on eliminating dollars, this facility is going to come handy.
Also read: Here are the pros of using India’s official digital currency
Relief for public
Something similar is going to change in the bond market. In regular bond market trades, the settlement process is done as per the (T+1) rule. By trading in digital currency, settlement will be done as per (T+0) rule.
Digital currency is a safe bet against fraud in the online finance market. It is going to halt the evil growth of private crypto markets.
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