Digital Rupee with specific end use to improve efficacy: Deloitte

Digital Rupee can play a big role in reducing the cost of cash since the country India has a relatively large proportion of cash in circulation as a percentage of GDP compared to other countries

Given India’s progress on faster payments, Digital Rupee is likely to find early acceptance and commercialization and democratise financial access with features to specify the end use to improve its effectiveness, according to professional services firm Deloitte.

Digital Rupee can play a big role in reducing the cost of cash since the country India has a relatively large proportion of cash in circulation as a percentage of Gross Domestic Product (GDP) as compared to other countries.

Currently, most security clearing and settlement processes have a multi-day lag. With the introduction of Digital Rupee there would be significant increase in efficiencies and reduction in associated reconciliation costs.

Monish Shah, partner, Deloitte India said the non-interest bearing tokenised Digital Rupee is closest to cash and may pave the way for retail Central Bank Digital Currencies (CBDCs).

Multicurrency CBDCs may follow trade flows and India can participate with countries who are large and stable trading partners.

The global firm today released a study on CBDCs “Central Bank Digital Currencies: Building Block of the Future of Value Transfer”.

Digital Rupee in the Indian context will be legal tender issued by the RBI in a digital form. It will be the legal tender issued by RBI in a digital form as a medium of exchange, store of value and unit of account, it added. The Central bank is working to issue Digital rupee in the next financial year (Fy23).

Distributed Ledger Technology (DLT) based Digital Rupee is likely to have a huge impact on the future of value transfer and push payments and financial services innovation.

Banks and other financial services players need to prepare for this new category of asset class, its impact on their balance sheets as well as customer value propositions.

Most regulators globally have taken initiatives towards embarking on their CBDCs journey by either connecting with industry experts to research different models or are in a testing phase.

Some countries such as Cambodia and the Bahamas have already launched CBDCs. Globally, efforts taken towards the development of CBDCs are very dynamic. With the COVID-19 pandemic, it is likely that the momentum behind these efforts will increase even further, it added.