CBDC (Digital Rupee) and India's Digital Economy

Why it is Important

Digital Rupee represents a sovereign currency in digital form. It aims to reduce cash dependency, lower transaction costs, and provide a secure alternative to private cryptocurrencies.

Key points for Prelims

• Issued By: Reserve Bank of India (RBI) under the RBI Act, 1934. It is legal tender and exchangeable 1:1 with physical cash.
• Types: CBDC-W (Wholesale, for interbank settlements) and CBDC-R (Retail, for public transactions).
• Technology: Blockchain-based distributed ledger technology (DLT), operating without requiring a physical bank account.

Mains Relevance

CBDC reduces the cost of printing and managing physical cash, improves monetary policy transmission, increases financial inclusion, and facilitates cross-border payments.

Way Forward

Enhance offline transaction capabilities, ensure robust cybersecurity architecture, resolve privacy concerns regarding state surveillance, and raise public awareness.