Lok Sabha Question No. 720 (UNSTARRED), answered on 2022-12-12
Subject: Digital Currency
Ministry: FINANCE
Asked by: Sanjay Sadashivrao Mandlik, Ravindra Kushawaha, Manoj Kumar Tiwari, Subrata Pathak, Sudheer Gupta, Sudheer Gupta, Ravi Kishan Shukla, Prataprao  Jadhav, Bidyut Baran Mahato, Sangamlal Kadedin Gupta, Sangamlal Kadedin Gupta, Sambhajirao Mane Dhairyasheel, Shrirang Appa Barne

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS LOK SABHA UNSTARRED QUESTION NO. 720 TO BE ANSWERED ON 12.12.2022

## Digital Currency

720. SHRI SANJAY SADASHIVRAO MANDLIK: SHRI RAVINDRA KUSHWAHA: SHRI MANOJ TIWARI: SHRI SUBRAT PATHAK: SHRI SUDHEER GUPTA: SHRI RAVI KISHAN: SHRI PRATAPRAO JADHAV: SHRI BIDYUT BARAN MAHATO: SHRI SANGAM LAL GUPTA: SHRI DHAIRYASHEEL SAMBHAJIRAO MANE: SHRI SHRIRANG APPA BARNE:

Will the Minister of FINANCE

be pleased to state:

- (a)  whether  the  Reserve  Bank  of  India  (RBI)  has  launched  Central  Bank  backed  digital currency recently on pilot basis;
- (b) if so, the details thereof along with the salient features of the said digital currency;
- (c) the details of various segments in which RBI has given permission for use of this digital currency;
- (d) the manner in which this digital currency is going to be beneficial for the market forces and facilitate the common public in their day to day transactions;
- (e) whether the RBI also proposes to use the digital currency in the retail sector in the near future and if so, the details thereof and the time by which it is likely to be introduced in the retail sector; and
- (f) the manner in which the Central Bank Digital Currency is going to reduce the operational costs, including printing, storage, transportation and replacement of bank notes and more?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

- (a): Yes  sir,  the  Reserve  Bank  of  India  has  launched  Central  Bank  Digital  Currency (CBDC) recently on pilot basis.

(b) to (e): The  Reserve  Bank  of  India  (RBI)  has  launched  pilots  in  CBDC  in  both Wholesale and Retail segments. The first pilot in the Digital Rupee -Wholesale segment (e₹W) was launched  on  November  1,  2022,  with  the  use  case  being  settlement  of  secondary market transactions  in  government  securities.  Further,  the  first  pilot  in  retail  digital  Rupee (e₹-R) was launched on December 01, 2022. The pilot is covering select locations in closed user group (CUG) comprising participating customers and merchants.

The e₹-R is in the form of a digital token that represents legal tender. It is being issued in the same denominations that paper currency and coins are currently issued. It is being distributed through financial intermediaries, i.e., banks. Transactions can be both Person to Person (P2P) and Person to Merchant (P2M). The e₹-R offers features of physical cash like trust, safety and settlement finality. Like cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks.

The  key  benefits  with  regard  to  CBDC  in  retail  segment  include  potential  reduction  in operational costs involved in physical cash management, fostering financial inclusion, adding efficiency to the existing settlement system and boosting innovation in cross-border payments space. In case of wholesale CBDC, dealing in central bank money provides benefits such as avoidance  of  settlement  guarantee  infrastructure  or  the  need  for  collateral  to  mitigate settlement  risk.  Going  forward,  bringing  efficiency  in  cross-border  payments  is  also  an important motivation for introducing CBDC in wholesale segment.

(f): Through introduction of CBDC, the Digital Rupee can be created by RBI, distributed to  the  banks  and  eventually  transferred  to  customers  in  much  less  time  and  with  reduced operational costs as compared to physical currency.

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