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Current Affairs

The Digital Rupee

Date: 03 February 2022 Tags: miscellaneous


The launch of a central bank digital currency (CBDC), known as Digital Rupee, has been announced by finance minister Nirmala Sitharaman.



The government had previously shown its intention to launch a digital currency backed by the central bank.



The CBDC will be launched by the Reserve Bank of India from the upcoming financial year. It will be backed by blockchain technology.



  • The Central Bank Digital Currency will be in form of legal tender that will be issued by RBI in digital form.

  • The digital currency will be similar to the fiat currency issued by the RBI in paper form. It will be interchangeable with any other currency.

  • The CBDC will be in electronic form and it would appear as liability (currency in circulation) on a central bank’s balance sheet. 


Need for CBDC

  • The aim of the move is to provide a legally backed digital asset that is secure as well as compliant with traditional banking system.

  • The government has issues with the existing digital currencies such as bitcoin, ether etc as they can be used for tax evasion, money laundering, terror financing etc.

  • The government’s announcement of its own digital currency will ensure that money flows through conventional path and can be easily monitored.

  • The move would give a big boost to digital economy and India would be the first major country to officially launch its currency in such a manner.


Implications on citizens

  • The Reserve Bank of India is yet to announce the details of how the Digital Rupee will be transacted by citizens.

  • The main difference will be that a Digital Rupee transaction will be instantaneous as compared to the current digital payment experience.

  • The currency can offer benefits in terms of liquidity, acceptance, scalability, ease of transactions with anonymity and faster settlement.

  • The cost involved in cross-border transaction could be cut significantly as there would not be inter-bank settlement. This will save remittance charges.