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

The Reserve Bank of India prioritizes the long-term potential of central bank digital currencies but is holding off on a full rollout until its effects are better understood.

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

Speaking to reporters during a conference in Cebu, Philippines, Reserve Bank of India Deputy Governor T. Rabi Sankar said CBDCs hold promise as a transformative tool for cross-border payments, trade settlements, and remittances. However, he noted that risks persist, as a full understanding of the technology’s implications has yet to be achieved, Bloomberg reports.

“We are in no hurry to roll it out immediately. Once we have some visibility of what the outcome or impact will be, we’ll roll it out. We don’t keep a specific timeline for that,” Shankar added.

Launched in December 2022, India’s CBDC — also known as the e-rupee — is a tokenized version of its fiat currency. The central bank has reported slow adoption, achieving 1 million retail transactions by mid-2024, partly due to incentives offered by local banks, including using the e-rupee for 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 pointed out uncertainties in how CBDCs might impact bank deposits and deposit insurance systems.