The Reserve Bank of India (RBI) has announced plans to accelerate its central bank digital currency (CBDC) plans by the end of the fiscal year. The banking regulator has enlisted four public sector banks and several international fintech firms to collaborate on the pilot initiative.
“The RBI has asked State Bank of India, Punjab National Bank, Union Bank of India and Bank of Baroda to run the pilot in-house,” an RBI official said. Local publication Money Control said India’s CBDC will leverage distributed ledger technologies (DLT) and work with companies with sufficient expertise in the field.
One such company is US-based FIS, which has an excellent track record in the virtual currency business. The Company’s expertise spans interest-bearing CBDCs, programmable payments and cross-border payments with other central banks engaged in various stages of their CBDC development.
“FIS has had various engagements with the RBI, and our connected ecosystem could be extended to the RBI to experiment with various CBDC options,” said FSI Senior Director Julia Demidova. She added that the company is ready to lend its expertise in wholesale and retail CBDCs to “commercial banks where they can test and tokenize central bank currency in the form of regulated digital currency.”
The exact date of the rollout remains unknown as the central bank is adopting a cautious strategy to mitigate the risk of errors. The precise specifications of the digital iteration of India’s legal tender remain unclear, but experts believe it could be modeled after the Chinese digital yuan with some modifications tailored to local requirements.
India bets on CBDCs
India’s quest for the CBDC has intensified in recent months, and the amendment to the RBI Act of 1934 has been the strongest statement of intent. Finance Minister Nirmala Sitharaman said in May that the RBI had been given carte blanche to design the CBDC in its own way, but said the country expects the currency to be launched within the financial year.
Although the bank will operate on its terms, sources say the country’s top administrators are pushing for a phased implementation. Sitharaman hailed the benefits a CBDC could bring to the country’s economy, including fostering financial inclusion and improving cross-border payments.
Around the world, central banks are pushing for the development of CBDCs in their jurisdiction to stifle the growing “crypto” of their economies.
To learn more about central bank digital currencies and some of the design decisions to consider when creating and launching them, read nChain’s CBDC playbook.
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