RBI in talks with fintechs ahead of launching digital currency

The Reserve Bank of India (RBI) is holding consultations with a bunch of fintech companies including US-based FIS. The central bank has also asked State Bank of India (SBI), Punjab National Bank (PNB), Union Bank of India and Bank of Baroda to run a pilot Central Bank Digital Currency (CBDC) project ahead of a possible rollout this financial year.

US-based FIS has been advising central banks on CBDC topics such as offline payments, programmable payments, new monetary policy toolkit, interest-bearing CBDC, fractional banking issues, financial inclusion, and cross-border CBDC payments.

CBDC is a currency that is backed by the regulator and stored in a digital format. The RBI could use blockchain technology to develop its CBDC, with adequate regulations.

While cryptocurrencies have been in use for some time globally, the risks associated with their usage, including anonymity and the lack of a central agency backing, have been at the forefront and have attracted more frauds and financial crime incidents recently. To mitigate some of the risks, central banks and regulators like the RBI have planned to launch a fiat digital currency.

Finance minister Nirmala Sitharaman said, “There are clear advantages in a central bank driven digital currency because in this day and age, bulk payments happening between countries, large transactions between institutions and large transactions between central banks themselves of each country are all better enabled with digital currency.”