“Introduction of ‘Digital Rupee’ – New Digital Currency”

Finance Minister, SmtNirmalaSitharaman, has announced the introduction of Digital Rupee to be issued by the Reserve Bank of India starting 2022-23 while presenting the Union Budget 2022-23 in the Parliament. The Reserve Bank of India will launch the CBDC from the upcoming financial yearthat will be backed by blockchain technology.

Key Highlights:

1. RBI to introduce Digital Rupee using Blockchain and other technologies.
2. A digital version of fiat currency is, by definition, an online token and has no physical presence. In that, it is a perfect replacement of cash for an economy.
3. The Central Bank Digital Currency (CBDC) will give a big boost to digital economy.
4. Digital currency will also lead to a more efficient and cheaper currency management system.
5. The Digital Currency will use block chain and other technologies.
6. 75 Digital Banking Units To Be Setup In 75 Districts By Scheduled Commercial Banks
7. The Reserve Bank had, in July 2021, indicated that it would soon begin work on the ‘phased implementation’ of the CBDC.
8. CBDC or Central Bank Digital Currency is a legal tender issued by the Reserve Bank of India. A CBDC is an electronic record or digital token of a country’s official currency, which fulfils the basic functions as a medium of exchange, unit of account, store of value, and standard of deferred payment.
9. CBDC is the same as currency issued by a central bank but takes a different form than paper (or polymer).
10. CBDCs should be exchangeable at par with cash.
11. CBDC will eliminate the need for interbank settlement.
12. Users of Digital Rupee will be able to transfer purchasing power from their deposit accounts into their smartphone wallets in the form of online tokens, which will be a direct liability of the Reserve Bank of India — just like cash.
13. “A CBDC, which is a liability of the RBI, will mitigate the risk of losses that Indian depositors face when dealing with commercial banks.”
14. The Finance Minister assured that the financial support for digital payment ecosystem announced in the previous Budget will continue in 2022-23. This will encourage further adoption of digital payments. There will also be a focus to promote use of payment platforms that are economical and user friendly.
15. The announcement regarding Digital Rupee in the Budget essentially expresses the government’s intention on cryptocurrencies and other virtual currencies.

Source: Union Budget 2022-23

Vipul Sheladiya

Sheladiya & Jyani

Chartered Accountants