Indian Central Bank To Introduce CBDC In Phases; Sets Up An Innovation Hub

The Reserve Bank of India (RBI) plans to launch the country's central bank digital currency (CBDC) in a phased manner and is set to follow a “graded approach."

According to a report from News18, the RBI says that India's CBDC must fall in line with its monetary policy, financial stability and efficiency of currency and payment systems.

A CBDC is the legal tender issued by a nation's central bank in a digital form and is based on blockchain technology. Several countries are in various stages of progress with their CBDCs, including South Korea which plans to issue a CBDC next year.

“The Reserve Bank is engaged in the introduction of a central bank digital currency (CBDC) in India. The design of CBDC needs to be in conformity with the stated objectives of monetary policy, financial stability and efficient operations of currency and payment systems," said the Annual Report on the Working of the Reserve Bank of India 2022.

Finance Minister Nirmala Sitharaman said when presenting the Budget 2022 that the digital rupee will be rolled out using blockchain and other technologies in 2022-23. The government is looking at introducing two types of CBDC, one focused on wholesale and the other retail.

"The Reserve Bank proposes to adopt a graded approach to introduction of CBDC, going step by step through stages of Proof of Concept, pilots and the launch," said the RBI. "Accordingly, the appropriate design elements of CBDCs that could be implemented with little, or no disruption are under examination."

The RBI has also set up the Reserve Bank Innovation Hub (RBIH), a wholly owned subsidiary of the Reserve Bank, which will be headquartered in the southern Indian city and tech hub of Bengaluru with eminent members from industry and academia "to foster innovation in a sustainable manner and through an institutional set-up."