Public sector banks and FinTechs to participate in RBI’s CBDC trial

By Puja Sharma

As part of its consultations with FinTech firms, the Reserve Bank of India (RBI) has asked four public sector banks to run a pilot Central Bank Digital Currency (CBDC) project ahead of a potential rollout this year, as reported by Moneycontrol.

The Reserve Bank Of India’s (RBI) Payments Vision 2025 mentioned as its core theme to be E-Payments for Everyone, Everywhere, every time. In addition, it visions regulating BigTech, FinTechs, BNPL, and introducing digital currency.

The list of FinTechs that the RBI is consulting includes US-based FIS which has been holding roundtable conferences and workshops with central bankers globally on CBDCs.

Julia Demidova, senior director at FIS, told local media firm, Moneycontrol this month that the firm has engaged the RBI on various occasions and, of course, our connected ecosystem could be extended to the RBI so it can experiment with various CBDC options.

According to Demidova, the FinTech company advises central banks on CBDC topics such as offline payments, programmable payments, the new monetary policy toolkit, interest-bearing CBDC, fractional banking issues, financial inclusion, and cross-border CBDC payments.

The introduction of CBDC in India will herald our thought leadership in payments because our wide payment ecosystem & digital outreach will ensure the success of use cases in retail & commercial transactions using CBDC delivering high efficiencies in cross border processing and settlements.” Rajesh Mirjankar, MD & CEO, Kiya.ai, a digital solutions provider for the banking and financial sector told IBS Intelligence.

The Payments Vision 2025 promises to further elevate our payment systems towards a realm of empowering users with affordable payment options accessible anytime and anywhere with convenience. As this journey toward a less-cash and less-card society unfolds, concomitant expansion in the basket of digital payment options with credence and confidence would ensure the sustenance of Reserve Bank’s approach of facilitating users with a seamless digital payment experience.

As Nirmala Sitharaman stated to the PTI on March 8 this year, “We took this decision in consultation with the RBI, and we expect the central bank to release its currency this year.”

In his statement, T Rabi Sankar, Deputy Governor, Reserve Bank of India said, Crypto technology and Web 3.0 is dominating the mind-space not just among the technology community but in the financial industry as well. Cryptocurrencies, as per their proponents, have the potential to play a critical role in how finance pans out in the future; indeed, there is open speculation about whether finance as we know it and banking as we know it can survive the rise of cryptocurrencies. In this talk, I will try and give you my assessment of cryptocurrencies and what they mean for our financial system.

Cryptocurrencies have specifically been developed to bypass the regulated financial system. These should be reason enough to treat them with caution.  Additionally, they undermine financial integrity, especially the KYC regime and AML/CFT regulations, and at least potentially facilitate anti-social activities. More substantially, they can (and if allowed most likely will) wreck the currency system, the monetary authority, the banking system, and in general Government’s ability to control the economy.

“They threaten the financial sovereignty of a country and make it susceptible to strategic manipulation by private corporates creating these currencies or Governments that control them. All these factors lead to the conclusion that banning cryptocurrency is perhaps the most advisable choice open to India. We have examined the arguments proffered by those advocating that cryptocurrencies should be regulated and found that none of them stand up to basic scrutiny.” Sankar had concluded earlier this year.