Editorial. CBDC matters – The HinduBusinessLine
Central bank digital currency (CBDC) is the digital equivalent of a country’s fiat currency and is issued and regulated by the monetary authority.
Pros and cons
CBDC has the potential to not only streamline traditional payments but also to enable new innovations in financial services.
However, there are concerns around data privacy and the potential impact on the traditional banking system.
CBDC and India
- The Reserve Bank of India has taken a cautious approach towards CBDC, emphasizing the need for extensive testing and analysis before implementation.
- Given India’s large volume of transactions, a wholesale CBDC for interbank transactions could be more practical than a retail CBDC.
Moreover, CBDC could enhance the efficiency of cross-border transactions and reduce dependency on international payment systems like SWIFT.
It is crucial for India to stay updated on global CBDC developments and progress in order to remain competitive in the digital economy.
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Opinion
CBDC matters
There are benefits in Central Bank Digital Currency (CBDC) — transparency, less reliance on intermediaries, lower costs, and broader accessibility. But challenges remain, particularly concerning privacy, security, and financial stability. China’s advanced trials show a CBDC’s potential, while digital currencies pose threats to traditional banking. In 2022, regulatory measures and CBDC experiments could make or break the digital currency arena. India’s cautious approach, balancing innovation with risks, could pave the way for a promising digital future.
COVID-19 accelerated digitalization, pushing many to explore digital currencies, but concerns linger around privacy, security, and data usage. Central banks must address these before full-scale CBDC adoption. Questions around data usage, data concentration risks, and operational issues must be resolved to ensure a fair, efficient, and stable financial system.
India must develop wholesale CBDC for global payments
Digital rupee can be useful in settling rupee trade | Photo Credit: Dmitriy Razinkov
Reserve Bank of India Deputy Governor T Rabi Sankar sprang a surprise of sorts recently when he suggested that RBI was in no real rush to launch the central bank digital currency (CBDC). This view indicates a dip in interest in CBDC, ever since Donald Trump took over as US President. One of the first legislations enacted by the Trump administration this year was to stop all work on development of a CBDC in the US, and create a framework for launching stablecoins as an alternative to the official digital currency. In India, the need for an official digital currency in retail payments when we have a vibrant UPI-based ecosystem is debatable. But wholesale CBDC which is used in interbank and very large transactions can be useful in settling external trade in rupees.
Over 130 countries representing 98 per cent of the global GDP are exploring the broad viability of a CBDC. India must do the same. Though only a few countries including Nigeria, Jamaica and Bahamas have launched an official digital currency, many central banks including the Peoples Bank of China are in an advanced stage of the CBDC pilot project. The use of the CBDC in cross-border payments can serve as an alternative to dollar-based channels of payment such as SWIFT in conditions of geo-political stress when the ‘weaponisation of the dollar’ becomes a distinct possibility. This came into play when Russia was locked out of SWIFT as part of the Ukraine war sanctions, and third countries took a hit. Around 13 projects are exploring the use of CBDC for cross border payments, including Project mBridge, which links banks in China, Thailand, Hong King, Saudi Arabia and UAE, bypassing the Bank of International Settlement.
The RBI began pilot testing CBDCs towards the end of 2022. There was a buzz when the retail CBDC or the e-rupee was introduced in December 2022, with many users downloading the wallets and transferring some money into it. But the project has not progressed due to limited use of e-rupee and the dominance of UPI-based payments. Outstanding e-rupees in the retail segment stood at just ₹1,106 crore towards the end of March 2025. While the RBI Deputy Governor said that there were 70 lakh users, they are unlikely to be actively using this route.
The RBI must develop more use cases which are unique to e-rupee. Enabling offline transactions and moving towards tokenisation, which provides anonymity to users, can improve usage. Significantly, while retail CBDC has made a slow start in India, wholesale CBDC has not taken off at all. The RBI annual report shows that no wholesale e-rupee had been issued until March 2025. The central bank must examine the challenges being faced by banks in using e-rupee in wholesale banking transactions. Cross-border payments in e-rupees become possible when other countries are willing. India must explore options with such countries to reduce the risks posed by weaponisation of the dollar.
Commerce Ministry slashes import duty on chicken legs by 50%
The Commerce Ministry has slashed import duty on chicken legs by 50 per cent to 5 per cent amidst a surge in shipments from the US. The import duty cut comes at a time when the US has emerged as a dominant supplier of poultry products following disruptions in the domestic market due to bird flu and other factors.
Data sourced from the Agricultural and Processed Food Products Export Development Authority shows that in the last fiscal, total export of poultry meat was around 228,397 tonnes, while imports stood at 33,885 tonnes.
A slew of factors, including changing lifestyle patterns, price stability in a turbulent market, and the growing poultry business have all contributed to boosting the sector’s growth.
However, experts have raised concerns over the quality and safety of these imports, highlighting the need for better monitoring mechanisms to ensure consumer safety.
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