India’s central bank signals no rush for digital currency implementation

The Reserve Bank of India is prioritizing the long-term potential of central bank digital currencies but is delaying their full rollout until their impact is better understood.

India’s central bank is taking a measured approach to launching a central bank digital currency, emphasizing the need for a comprehensive assessment of its potential impact before expanding its use.

Speaking to reporters at a conference in Cebu, Philippines, Reserve Bank of India Deputy Governor T. Rabi Sankar said CBDCs show promise as a transformative tool for cross-border payments, trade agreements and remittances. However, according to Bloomberg, he stated that risks continue because the effects of technology have not yet been fully understood.

“We are in no rush to roll this out immediately. Once we have some visibility into what the outcome or impact will be, we will roll it out. We are not keeping a specific timeline for this,” added Shankar.

Launched in December 2022, India’s CBDC, also known as e-rupee, is a tokenized version of fiat currency. The central bank said it is slowly gaining adoption, processing 1 million retail transactions by mid-2024, partly due to incentives offered by local banks, including the use of e-rupee in salary distributions.

In mid-August, Deputy Governor Michael Debabrata Patra highlighted the potential risks of CBDCs to banking stability. He warned that CBDCs could be misperceived as “safe havens” during financial crises, making bank deposits more vulnerable to withdrawals and potentially triggering “bank runs.” Patra also noted uncertainties about how CBDCs could affect bank deposits and deposit insurance systems.