Introduction
RBI Deputy Governor RABI SHANKAR said "Phased introduction of a central bank digital currency"
What is Currency?
It is the liability of the bank and an asset for the person who is holding it
Evolution of Currency
BARTER SYSTEM
COINS - GOLD, SILVER, BRONZE
CLAY TABLETS
PAPER CURRENCY
Then, Sovereign Government (British) issued the Currency notes.
What is CBDC?
Central Bank Digital Currency (CBDC) is an IOU(I OWE YOU) issued by the Central Bank where {1 Digital Rupee = 1 Rupee Note }
Whether it is issued from RBI or via banks?
Under RBI , it is issued either directly by the Federal Bank or through SCBs but it is regulated by the RBI.
How CBDC is different from Private Crypto Currency?
Central Bank issued Digital Currency has a value where buyers can honour (accept) it for transactions, Unlike Private Crypto Currencies like Bitcoin, Ripple, BAT does have a value though buyers won't accept it for transactions because of no issuers.
What are the Pros and Cons?
Pros
If RBI issues digital notes , it is settled directly via UPI directly by its system ,So that banks need not to be intermediaries.
Cross Border Transactions gets easier
More secure Transactions
Cons
Banks lose deposits, can't give loans , so that Money won't circulate, CASA decreases.
Cyber risk- a great threat to the banking
Only 70% literacy rate in India.
Internet Access - many people all over the nation can't afford internet especially rural areas.
Digital asset- technology dependent
Rupee loses its value as a medium of exchange
Depreciation of The Rupee in global trade
Conclusion
Digital Currency should be introduced and regulated by Central Bank so that, Deposits in banks should remain attractive and No interest to be paid by the Banks.