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RBI Digital Rupee Offline:
Reserve Bank of India (RBI) digital rupee is set to go offline as part of the pilot program. RBI is planning to introduce the offline RBI digital rupee transactions soon which was announced after the 3-day Monetary Policy Committee meeting.
The RBI digital rupee or e-rupee is known as Central Bank Digital Currency (CBDC) which is exchangeable similar to foreign currency. We have covered the latest announcement on digital rupee in India.
The Reserve Bank of India has conducted a meeting regarding the Monetary Policy that looks after several factors like Repo rate and interest rates. After the meeting, RBI governor Shaktikanta Das made an announcement regarding RBI digital rupee going offline.
This is announced to reduce the dependency on physical currency and increase digital payments. RBI stated it is looking after virtual currencies that have fewer risks compared with physical currencies.
RBI Digital Rupee:
To implement this RBI has launched a pilot program in December 2022. Through this users will be issued a digital wallet from banks that can be stored on mobile phones. It will be easy to do transactions just like UPI through a digital wallet whether it is person to person (p2p) or person to merchant (p2m) using any QR codes.
This will support wiping out black money in the system along with eliminating the burden of charge of Rs4,984.80 crore on RBI for printing physical money.
As per reports of RBI, it is said that 105 countries, representing 95% of world GDP have taken steps to create digital currency in their ecosystem. 50 countries are in an advanced stage of introducing digital currency while 10 countries have already used digital currencies.
The RBI digital rupee was initially introduced in four lenders which include SBI, ICICI, Yes Bank and IDFC Bank. Branches operating in the cities of Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla have introduced the digital wallet system first.
This will be extended to more states and users soon. Bank of Baroda, Kotak Mahindra Bank, Union Bank, HDFC, and HSBC, have participated in Mumbai, New Delhi, Bengaluru and Bhubaneshwar as part of the pilot program last year. The RBI has targeted 10 lakh transactions a day by December 2023.
Features of E-Rupee:
- It is a liability of RBI
- It is safe for any transaction and anyone
- Easily convertible to physical money of commercial bank and cash
- Decreases the cost of issuance of money and transactions
- It is legal and holders need not have a compulsory bank account.
- Similar to the physical rupee
This currency can be converted to any kind of transaction like deposits and withdrawals in banks. This will significantly reduce the risk of the financial system. It is cost-effective and endless which supports cross-border payments too. It will be similar to digital payment through UPI but not the same.
Digital payments have grown to 55 % over the last five years through UPI. This is the reason behind the introduction of the RBI digital rupee.
Why Digital Rupee Is Going Offline?:
The RBI has proposed to introduce an offline functionality for this digital rupee, for transactions in poor internet connectivity areas. It is said that both proximity and non-proximity-based offline ways are underway for trails.
This will be tested across hilly areas and rural and urban locations for its services. Currently, the transactions are available only through internet / online digital rupee wallets in particular locations with banks allowing p2p and p2m transactions. It is now aimed to provide offline RBI digital rupee transactions with adaptable functions.
Conclusion:
Meanwhile, the RBI has fixed the repo rate at 6.5 % which has been unchanged for the last 1 year. This is due to expected inflation and firm growth dynamics in India.
The repo rate is at which the RBI lends money to banks.
The RBI conducts meetings for every 2 months to estimate the rates, money supply, inflation overview and various economic measures. Raising interest rates is a monetary policy that helps lower demand in the economy which results in a reduction of inflation.
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