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The country’s central bank head is cautious about cryptocurrencies, emphasizing that India already has robust digital payment infrastructure in place, making it unnecessary to rush into embracing digital currencies.
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India will adopt a cautious approach towards cryptocurrencies while supporting local digital payment systems, RBI governor Sanjay Malhotra said at Delhi School of Economics. Among other issues, he also spoke on rupee movement, inflation targeting and the regulatory space.
New Delhi: India will maintain a guarded stance on cryptocurrencies and stablecoins even as it accelerates support for homegrown digital payment systems such as UPI, NEFT and the digital rupee, Reserve Bank of India (RBI) governor Sanjay Malhotra said on Thursday. The approach, he said, reflects the central bank’s view that India’s existing digital rails already address the gaps in payments that advanced economies are now looking to bridge with new crypto rules.
Speaking at the Delhi School of Economics, Malhotra said: “Our country is different from the US in the sense that we have a very sound system of payments. We have the UPI, we have the NEFT and the US does not have to the extent and scale that we have… So the domestic payments problem, the issues they have, are not there with us.”
Even as the RBI warns of the risks associated with private crypto assets—from volatility to potential systemic spillovers—the central bank itself is scaling trials of its digital rupee. “We are promoting and experimenting with the CBDC (central bank digital currency), which is backed by the central bank, the RBI, as an alternative for payments in our country, and more importantly, for full-value and cross-border payments,” Malhotra said.
Ultimately, the political leadership will determine the country’s stance on private crypto assets, he said. “The government has to take a view… they will take a final call as to how, if at all, crypto is to be handled in our country,” the governor said.
Rupee movement
Malhotra pushed back against concerns over the rupee’s recent weakness against the US dollar, insisting that the currency’s movement reflects market forces rather than intervention-driven signalling. “We do not target any level… It’s for the markets to decide,” he said.
Exchange rate movements, said the central bank chief, are driven largely by dollar demand arising from trade and capital flows. “If the demand for dollars goes up… then it depreciates. If the demand comes down, then it appreciates. That’s the simple answer,” he said.
Over the past one year, the Indian rupee has weakened about 5% against the US dollar to about ₹88.7-88.8.
Malhotra attributed the recent pressure partly to expectations stemming from tariff adjustments and their potential effect on the current account. “On the trade side, you have seen that there are some tariffs… expectations have built up that our trade deficit may go down.” The outcome depends heavily on how those expectations evolve, he added.
The RBI governor struck a confident tone on external resilience, pointing to India’s foreign exchange reserves of roughly $690 billion.
“A good trade deal (with the US), hopefully, going forward… should relieve whatever pressure has been there on our current account,” he said.
Inflation targeting framework
Malhotra reaffirmed that India’s flexible inflation targeting framework, with a band of 2–6%, remains suited to an economy prone to food-price shocks.
“We have a band. We do not have a point target with a band,” he said, adding that a wider corridor is necessary because of a very high component of food and volatility of prices.
He declined to comment on whether the band should be revisited. “It would be inappropriate on my part to give the views… when this process is actually going on,” he added.
Principles-based regulations
A substantial portion of Malhotra’s speech was devoted to the RBI’s evolving regulatory architecture, one that aims to move from rigid rule-making to a more principle-driven approach, without compromising supervisory clarity.
He said supervisors are expected to interpret and apply regulations based not only on the exact wording but also on the underlying intent. Regulations go through many iterations before they are actually finalized, and the shift to principle-based oversight requires significant internal capacity-building, Malhotra said.
“We start small. We make humble beginnings. We take baby steps,” he said, citing the pilot of the expected credit loss framework with non-banking finance companies before expanding it system-wide. “Only then do we finalise once we know that people have understood it.”
To keep the regulatory framework from calcifying, the governor said the RBI embeds periodic reviews into its system. “Every five, seven years… I am going to look into those regulations and see whether you actually need them,” he said.
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