CBDC trial a landmark moment in the history of money: Shaktikanta Das

• Reserve Bank of India governor Shaktikanta Das today announced that retail central bank digital currency (CBDC) trial will be launched later this month.
  
• The wholesale segment of the digital rupee pilot went live with select banks on November 1, with 48 trades executed, amounting to ₹275 crore.
  
• Das also underlined that the end-to-end digitised Kisan Credit Card-based loans are currently being tested in Madhya Pradesh and Tamil Nadu, with a wider rollout expected to happen in 2023.
  

Reserve Bank of India governor Shaktikanta Das today said that the retail segment trial of central bank digital currency (CBDC) will be launched later this month. This comes a day after the central bank’s digital rupee pilot went live with select banks yesterday for the wholesale segment.

“Our endeavour is to try and launch CBDC in a full-fledged manner in the near future. The retail part of the CBDC trial will be launched later this month. But I don’t want to give a target date by which time CBDCs will be launched in a full-scale manner because this is something where we have to proceed very carefully,” Das said in his address at FIBAC 2022, an annual banking conference organised by FICCI.

RBI is currently running two pilot projects – CBDC and end-to-end digitised Kisan Credit Card-based (KCC) loans. Das said that the central bank wants to ensure all the technological and other process-related issues are ironed out before they are rolled out on a wide scale.

The CBDC pilot is currently limited to the wholesale segment with nine banks having been identified as participants. KCC-based loans are currently only being tested in Madhya Pradesh and Tamil Nadu.

There will be tech and process challenges, says Das

RBI’s CBDC pilot for the wholesale segment on November 1, with select banks like ICICI Bank, Bank of Baroda and IDFC First Bank, saw transactions totalling to ₹275 crore. All in all, 48 trades were executed using CBDC on the first day of the trial, according to data from the Clearing Corporation of India.

“It was indeed a landmark moment in the history of money, in the history of currency in our country. Going forward, it will be a landmark achievement so far as the functioning of the entire economy is concerned,” Das said, adding that is going to be a major transformation in the way business is done.

However, Das added that the RBI is not in a rush for a wider rollout. “There are going to be some technological challenges and process challenges. We want to iron out all those aspects and introduce it in a manner that the whole process and introduction is thereafter non-disruptive,” Das said.

Amongst the key benefits of CBDC include a reduction in costs associated with physical cash management, improving efficiency and innovation in payments, progressing towards a less-cash economy, and providing the public with a risk-free virtual currency.

Pilot project on digitised Kisan Credit Card-based loans

Earlier in September this year, RBI launched a pilot project in Madhya Pradesh and Tamil Nadu on end-to-end digitised Kisan Credit Card-based loans. Via this system, farmers can apply for loans using their mobile phones, and the banking system can take the process forward.

Once the application is initiated by the farmer, data from credit rating agencies, satellite data of the farmer’s land is obtained to determine its condition and what was cultivated on it and analysed using artificial intelligence.

Das said that the primary objective of this project is to minimize the amount of time and effort it takes a farmer to obtain a KCC-based loan. He added that the objective right now is to ensure that the issues in the process are ironed out before a wider rollout, which he expects to happen sometime in the calendar year 2023.

KCC-based digital loans will not only require banks to upgrade their technologies, but state governments will also have to ensure land records are digitised, Das said.

‘Monetary policy actions undergoing a regime shift in advanced economies’

Das also spoke about how the triple shocks of Covid-19, the Russia-Ukraine war and the turmoil in financial markets are reshaping geopolitics and economic relationships.

“The confluence of these factors and circumstances is reverberating speedily across jurisdictions. With monetary policy actions and stances undergoing a regime shift in the advanced economies, the financial conditions have tightened sharply across markets and have accentuated financial stability risks,” Das said.

As central banks across the world are raising interest rates, it’s leading to a slowdown as estimated by the International Monetary Fund (IMF). The IMF has projected the global economic growth to contract from 6% in 2021 to 3% in 2022 and 2.7% in 2023.

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