‘Not an unmixed blessing’: RBI report amid plan for digital currency

Published on Feb 28, 2021 03:23 PM IST

Earlier in the week, RBI governor Shaktikanta Das said that the central bank plans to launch its own digital currency and the work with respect to the same was in progress.

Reserve Bank of India(HT Photo)
Reserve Bank of India(HT Photo)
By | Edited by Mallika Soni

The Central Bank Digital Currency (CBDC) has the potential to bring about a sea change in payment transactions and quicken transmission, the Reserve Bank of India (RBI) said in a report. "CBDC is, however, not an unmixed blessing – it poses a risk of disintermediation of the banking system, more so if the commercial banking system is perceived to be fragile," the report said on Friday.

The report also said that it is imperative for RBI to monitor global developments, explore the possibility of the need for the introduction of the digital currency and remain in readiness to operationalise CBDC, as and when necessary. "CBDC can be designed to promote non-anonymity at the individual level, monitor transactions, promote financial inclusion by direct benefit fiscal transfer, pumping central bank 'helicopter money' and even direct public consumption to a select basket of goods and services to increase aggregate demand and social welfare," the report said adding it can act as a direct instrument of monetary transmission.

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Earlier in the week, RBI governor Shaktikanta Das said that the central bank plans to launch its own digital currency and the work with respect to the same was in progress. "It will be very difficult and not possible for me to give a date as there are several loose ends that need to be tied up and it is receiving our full attention," Das said.

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Das added that the move comes after there have been "major concerns" about cryptocurrencies, flagging potential risks caused by cryptocurrencies to financial stability. Das also said that he had communicated his concerns to the government.

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A government panel in 2019 had recommended banning all private cryptocurrencies with a jail term of up to 10 years and heavy fines for anyone dealing in digital currencies. RBI also told lenders in 2018 that they could not offer any banking services to any cryptocurrency traders or exchanges, but the order was challenged in court and eventually reversed by the Supreme Court.

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