find it difficult to access agricultural credit for inputs and raw materials as they do not have the land title to submit to the banks. however, programming the end use for purchase of agricultural inputs can give the required comfort to banks and thus establish the identity of a farmer not through his land holding but through the end use of funds being disbursed. yet another path breaking use case7 is farmers getting purpose bound money through programmable cbdc for generation of carbon credits. other new use cases aimed at testing features such as anonymity and offline availability are proposed to be rolled out gradually. 14. it is important to emphasise that there should not be in any rush to roll out systemwide cbdc before one acquires a comprehensive understanding of its impact on users, on monetary policy, on the financial system and on the economy. such understanding would emerge from generation of user data in pilots. actual introduction of cbdc can be phased in gradually. undoubtedly, cbdc has the potential to underpin the payment systems of future, both for domestic payments and also cross - border payments. artificial intelligence and dpi 15. today, as artificial intelligence ( ai ) is making forays in the financial sector in the form of services like chatbots, internal data processing for intelligent alerts, fraud risk management, credit modelling and other processes. integrating this cutting - edge technology into a robust and responsible dpi presents an opportunity to amplify the capabilities and efficiency of dpi even further. as the report of india's g20 task force on dpi states, the seamless fusion of dpi with ai would propel us into a new world of " digital public intelligence ". integration of ai into financial services brings significant opportunities for all stakeholders. for customers, ai enables hyper - personalised products and faster, more relevant services. financial institutions like lenders benefit from advanced tools for risk and fraud management, streamlined operations, and reduced compliance costs. regulators gain enhanced oversight and real - time monitoring capabilities, which would improve regulatory enforcement and market stability. 16. such advancements, however, come with serious challenges. data privacy concerns arise from handling vast volumes of personal information. ethical ai governance is essential to ensure fairness and prevention of bias. financial institutions must ensure that ai models are explainable, i. e., ability to explain why certain results are produced. ai technology can also be misused to spread misinformation, potentially causing severe damage and disruption to dpis as well as

control. impossible trinity in conceptual terms, the challenge that the reserve bank faces on account of opening up the economy is best explained by the impossible trinity argument which asserts that a country cannot simultaneously maintain all three policy goals of free capital flows, a fixed exchange rate and an independent monetary policy. the impossible trinity, as students of economics have learnt for over a half century, has a strong theoretical foundation in the mundell - fleming model developed in the 1960s. bis central bankers ’ speeches given the impossible trinity trilemma, countries have made different choices. the most common case, typical across advanced economies, is to give up on a fixed exchange rate so as to run an open economy with an independent monetary policy. on the other hand, economies that adopt a hard peg give up on the independence of monetary policy. examples include the currency boards set up by hong kong and, for a time, argentina. more recently, responding to a rapid appreciation of the swiss franc as a result of the safe haven effect, switzerland declared its commitment to defend a pre - announced exchange rate. in contrast to advanced economies which opt for corner solutions, emerging economies here typically opted for middle solutions giving up on some flexibility on each of the variables to maximize overall macroeconomic advantage. india ’ s approach to the impossible trinity in india too, we have opted for a middle solution whose contours are the following : ( i ) we let our exchange rate be largely market determined, but intervene in the market to smooth excess volatility and / or to prevent disruptions to macroeconomic stability ; ( ii ) our capital account is only partly open ; while foreigners enjoy mostly unfettered access to our equity markets, access to debt markets is restricted ; there are limits how much resident corporates and individuals can take out for investment abroad, but the limits are quite liberal ; and ( iii ) because of the liberalization on the exchange rate and capital account fronts, we may forfeit some monetary policy independence. what the middle solution also implies is that we have to guard on all the three fronts with relative emphasis across the three pillars shifting according to our macroeconomic situation. capital flows what does the impossible trinity mean in practical terms? let us examine this in terms of capital flows. we do need capital inflows, of course, since we have a current account deficit ( cad ). in an ideal world, we will want capital flows just about sufficient to finance our cad ; also we have an express preference for equity flows over