Digital Rupee — the dawn of a revolution in digital payments by EY
Digital payments helped unlock US$16.4 billion of economic output, which represents 0.56% of the country's GDP. Hence, it was not a surprise when, in November 2021, the Reserve Bank of India announced the next big revolution in digital payments — India’s own digital currency (#CBDC), the Digital Rupee or E-Rupee.
In this report, the focus is on five important use cases (both wholesale and retail) of Digital Rupee curated in the Indian context; they are:
- Programmability
- Financial inclusion
- Disaster and MSME financing
- cross-border transactions
- settlement of securities
Though Digital Rupee and other Central Bank Digital Currencies (#CBDC) are expected to have multiple benefits, they also come with their own range of privacy, cyber, monetary, technological, and legal risks and challenges.
The transition from physical cash to Digital Rupee is expected to have its own complexities and will involve issues regarding interoperability between Digital Rupee and existing financial infrastructure.
Banks will need to increase spends to upgrade their existing technology to communicate with different ledger technologies and platforms not only in India but globally as well.
Doing this will have manifold potential benefits.
In the Indian context, the series proposes key policy considerations and their design for Digital Rupee to unlock multiple opportunities for stakeholders in the financial ecosystem and beyond.