RBI planning on introducing digital currency

The Reserve Bank of India (RBI) is considering issuance of its own virtual currency (VC) while instructing financial institutions to refrain from and cut off business relations with private entities that are dealing with virtual currencies.

An interdepartmental group has been constituted to study and provide guidance on the “desirability and feasibility” to introduce a “central bank digital currency” and will submit its report by June, the central bank said.

“Several central banks are debating the possibility of introducing a fiat digital currency. As opposed to private digital tokens, these are issued by a central bank. They constitute a liability of the central bank, and they will be in circulation in addition to the paper currency that we have,” RBI deputy governor BP Kanungo told reporters during the customary post-policy address.

Explaining its rationale behind the central digital currency, RBI said technological innovations, including virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system.

The RBI has also directed banks and regulated entities not to deal with or provide services to individuals or businesses dealing in virtual currencies.