MUMBAI: THE Reserve Bank of India (RBI) said it will shortly start pilot launch of digital version of Indian currency Rupee for specific use cases.

The RBI stated in an official letter that it has also produced a concept note on Central Bank Digital Currency (CBDC) that intends to raise knowledge about such currencies in general and the proposed features of the Digital Rupee in particular.

The central bank digital currency is a sovereign currency issued by the central banks in accordance with the monetary policy. On the balance sheet of the central bank, it will show up as a liability.

The RBI said in a statement that "the concept note also examines crucial factors such as technology and design choices, potential uses of the digital rupee, and issuance methods, among others."  The concept note said, all individuals, businesses, and governmental organisations must recognise the digital currency as a form of payment, legal cash, and a secure place to hold value.The digital currency will be freely convertible into cash and money from commercial banks. It will be fungible legal currency, and owners are not need to have a checking account.

The finance minister said that the RBI would launch a digital counterpart to the rupee in the current fiscal year in the Union Budget for 2022–2023. 

The RBI stated in a statement that it would periodically communicate about the unique characteristics and advantages of the digital rupee as the size and scope of such pilot launches grow.

The cost of issuing currency and conducting transactions should be reduced thanks to the Digital Rupee. The central banks are currently attempting to spread acceptance of a more acceptable electronic form of cash in light of the declining use of paper money.

The state-of-art payment systems of India, which are affordable, accessible, convenient, safe, and secure, will enable the central bank's digital currency. The apex bank's concept note stated that the e-rupee will support India's digital economy, increase financial inclusion, and improve the effectiveness of the monetary and payment systems.
"In addition to the existing payment options, there will be the e-rupee. It is essentially identical to banknotes, but because it is digital, it is probably simpler, quicker, and less expensive. It also offers all the advantages for transactions of other types of digital money "In the statement, the RBI noted.
The apex bank's concept note said, digital money should be built as a highly scalable platform that can support very high transaction volumes and rates without suffering performance deterioration. It should be strong to guarantee the stability of the financial ecosystem, and among other aspects, contain tamper-proof access control methods and cryptography for data security.

Huge amounts of data are anticipated to be generated in real-time by the central bank's digital currency. "After taking into account the issues with anonymity, competent analysis of the Big Data produced by CBDC can support the development of evidence-based policy. For service providers of financial product insights, it may also develop into a valuable data source" as per concept note.

The RBI emphasises the need for consumer protection as a foundation of financial stability. The central bank has asked for a framework for consumer protection that takes into account the differences in consumer digital literacy as well as strategies for enhancing consumer knowledge and transparency.

The RBI demanded that customers have easy access to digital currencies. Additionally, a strong method for effectively and efficiently resolving consumer complaints was emphasised.