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Retail Digital Rupee Pilot Set To Launch Today. Read Details Here
01 Dec 2022, 03:01 PM IST 
The digital rupee would appear as a liability on RBI's balance sheet.(Representational)
- Digital rupee or central bank digital currency (CBDC) is the same as fiat currency, i.e., sovereign currency
- The difference between CBDCs and private virtual currencies is that the latter is not backed by any assets
- CBDCs help avoid damaging consequences of private currencies, according to the RBI
- Digital rupee would appear as a liability on RBI's balance sheet, which means it will be a part of currency in circulation
- CBDCs score over other digital payment systems such as UPI (unified payment interface) as they reduce settlement risk
- An Indian importer in the future may be able to pay an American exporter in digital currency on a real-time basis if both countries approve the use of digital currencies. In such cases, there would be no intermediaries and any settlement would be final; the time zone difference would no longer matter
- Digital rupee will have a slew of benefits such as reduction of losses and transaction costs, better transparency in money movement, etc, says Anuj Kacker, Co-Founder, Freo, a neobank.
- Programmable payments, cross-border payments with lower costs of printing and managing currency, and enhanced safety could be some of its key advantages, says Mihir Gandhi, Partner & Leader - Payment Transformation, PwC India.
- On the risk front, banks may lose deposits if the digital rupee gains acceptance by a significant mass of the population over time, which may impact their ability to lend
- Cash withdrawals are easy with CBDCs and therefore, the flight of deposits is a risk for banks
