The next phase of the digital rupee will be launched soon. This will involve four additional banks, including Bank of Baroda, HDFC Bank, Union Bank of India, and Kotak Mahindra Bank. This facility will be accessible in eight cities, including Indore, Patna, and Ahmedabad. According to the CNBC Aawaz report, some changes are also anticipated in the subsequent phase in light of the lessons learned from the first phase.
So far, the Digital Rupee, a digital currency issued by the Central Bank, has received positive feedback. Since December 1, it has been used by about 16,000 people, and 1,60,000 transactions have been made with digital rupee.
The following phases will cover Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Patna, and Shimla. Mumbai, Delhi, Bangalore, and Bhubaneswar are the only four cities that have been included thus far.
What is a CBDC exactly?
A digital version of currency notes issued by a central bank is known as CBDC. Even though most central banks are looking into issuing CBDC, the main reasons for doing so depend on the requirements of each country.
In the Union Budget that was presented to Parliament on February 1, 2022, India announced that the Digital Rupee would be introduced beginning with the fiscal year 2022-23.
CBDC is the same as currency issued by a central bank, but it takes a different form than paper (or polymer), as stated on the RBI website. On a central bank’s balance sheet, it will be listed as a liability—a currency in circulation—because it is an electronic sovereign currency.
CBDCs ought to be able to be exchanged just like cash.
How does one issue it?
It can be distributed through intermediaries like banks in the same denominations that are currently issued for paper currency and coins. Through a digital wallet that participating banks provide and store on mobile phones or other devices, users can transact with e-rupee.
What are the main benefits?
The RBI claims that payments made with CBDCs will be final, lowering settlement risk in the financial system. Interbank settlement will no longer be necessary because CBDC. It can be compared to a UPI system, which uses CBDC transactions rather than bank balances to act like cash transfers.
