The Slow but Steady Expedition of Central Bank Digital Currency in India- A Study with Special Reference to the People’s Expectations on Central Bank Digital Currency

Abstract

In the present context when the digital payment ecosystem is dominated by the Unified Payment Interface (UPI) system, RBI sets to introduce Central Bank Digital Currency (CBDC) or e-rupee. CBDC is the digital version of the rupee and is the liability of the Central Bank. CBDC is accepted as the legal tender, medium of payment and a safe store of value universally. The research article explores the key policy motivations for introduction of CBDC in the international scenario and in Indian context. The study identifies some key pertinent issues of CBDC like its probable conflict with the bank deposits, its ability to promote financial inclusion and prevent the illicit use of money, its presence as an acceptable alternative to the existing payment modes, its role to improve retail and cross-border transactions, to name a few. The article tries to showcase the people’s expectations specifically regarding these issues and analyses them across demographical variables. The research article tries to identify some significant issues in the design features of the CBDC that needs the attention of the policymakers. The design features in the e-rupee should aim to maintain a proper balance between its attractiveness and also to fulfil its key objectives of existence.

Keywords: CBDC, e-rupee, Retail Digital Payment System, Cross-border Payment System, Financial Inclusion, Illicit use of money, Bank Deposits, Cryptocurrency

DOI: 10.7176/ISDE/14-1-03

Publication date: January 31^st 2024

JEL Classification: G28, C81, E44, O16