Reserve Bank of India is exploring the idea of an rupee-backed central bank digital currency, reported Economics Times(ET) on August, 30.
In The Annual Report for the year 2017-18, bank mentions “In India, an inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency,.”
Highlighting the issue of increasing cost of printing paper money, the report asserts “(Globally) the rising costs of managing fiat paper/metallic money, have led central banks around the world to explore the option of introducing fiat digital currencies.” In Financial year 2018, India spent some 6.3 billion rupees in printing paper money.
Changing payment industry and rising influence of private digital tokens, are also in the list of influencing factors behind this discussions, cited the ET report.
Mahesh Makhija of EY India told ET, “The idea of a central bank issued digital currency is very promising though issues around digital counterfeiting will need to be addressed.”
Adding words of caution, Central Bank’s report said, “the cryptocurrency eco-system may affect the existing payment and settlement system which could, in turn, influence the transmission of monetary policy.”
In India, RBI has imposed a ban on payment gateways and banks, making them refrain from providing any assistance in cryptocurrency related business. The ban is in effect since July 5th. And many domestic crypto exchanges have since then started adjusting themselves around the ban.