Bankers say the Indian digital rupee has failed to generate interest

Bankers say the Indian digital rupee has failed to generate interest

A month after India piloted the use of the official digital rupee for inter-bank and institutional transactions, several bankers said stakeholders did not see any benefits.

A month after India piloted the use of the official digital rupee for inter-bank and institutional transactions, several bankers said stakeholders did not see any benefits.

Seven bankers told Reuters that the use of e-rupee Reserve Bank of India (RBI) It was a lot like the Internet Banking services which users were already satisfied with.

The Reserve Bank of India basically created the e-rupee as a digital alternative to cash – one that uses blockchain Distributed ledger technology is somewhat anonymous and most relevant to consumers and retailers. But in initial experiments, banks were using them to settle with each other — without any particular advantage, according to the bankers.

In fact, the electronic rupee, one of several central bank digital currencies (CBDCs) being trialled around the world, had a drawback, they said: each trade must be settled using it individually, whereas trades in the established interbank payment system are the first to be settled. Liquidated and then settled in bulk with the clearing company.

“There is no advantage over internet-based transactions, and the lack of netting is actually a huge handicap,” said an executive at a private bank that used wholesale electronic rupees in the pilot programme.

Another problem is that since e-rupee transactions do not completely replace those using established procedures, they add to the accounting work of banks.

“At the moment it is more efficient, because trade volumes are still low in that respect, which means we have to manage cash as well, which leads to more paperwork and additional labour,” said a senior executive at a state-owned bank. , also part of the pilot.

Bankers said they were enthusiastic at first but now wonder if financial institutions want to continue using the electronic rupee.

“I don’t think once the pilot is over, with nothing RBI “Banks will want to use it,” said the private banker.

As part of the experiment, banks are using it to settle trades in government securities. On Thursday, 2.1 billion rupees ($26 million) worth of bonds traded using electronic rupees, compared to as much as 5 billion to 6 billion rupees per day in the first two weeks.

The Reserve Bank of India (RBI) did not respond to an email request for comment. The e-rupee trial launched on November 1.

In mass use, she said, digital currencies can make settlement systems more efficient and secure. The payment mechanism reduces the number of middlemen by eliminating the need for clearing houses. The Reserve Bank of India said it will also provide a more secure way of digital payment in retail use.

consumer experience

RBI started a new e-rupee trial for consumers and retailers on December 1.

UPI, a real-time instant consumer payments system that allows users to transfer money Interbank without disclosing account details, has been a factor in the rise in the volume of digital payments in India. Bankers said it would be a strong competitor to retail use of the electronic rupee.

“UPI had clear advantages and that is why it became so popular,” said another banker World Health Organization It is part of the pilot project he said. “When you already have a seamless and efficient form of digital transactions, the shift may not come naturally and may actually see less response (in consumer transactions) than wholesale CBDCs.”

The International Monetary Fund said in November that the similarities between central bank currencies and instant payment systems are too strong to ignore and could limit the use of new digital currencies.

However, there is still hope for the electronic rupee.

“CBDCs may not necessarily replace cash in India, but it can be an alternative and there is room for both to co-exist,” another senior banker said, adding that unlike other cryptocurrencies, CBDCs, which have a fixed value equal to currencies national. It was a risk-free proposition, which should help her adoption.


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