RBI to Introduce Wholesale CBDC in Call Money Market by October
The Reserve Bank of India (RBI) is set to introduce its wholesale central bank digital currency (CBDC), the Digital Rupee-Wholesale, in the call money market by October. The announcement was made by Ajay Kumar Choudhary, an executive director at the RBI, on the sidelines of the G20 Leaders’ Summit in New Delhi.
The call money market is a short-term lending market where banks borrow and lend money to each other. It is an important part of the Indian financial system, as it helps banks to manage their liquidity needs.
The introduction of the CBDC in the call money market is expected to make it more efficient by reducing transaction costs and settlement risk. Currently, banks borrow and lend money to each other using a variety of instruments, such as repo and reverse repo agreements. These instruments involve the use of collateral, which can be costly and time-consuming.
The CBDC, on the other hand, is a digital currency that is issued by the central bank. It is a more efficient way to settle transactions, as it does not require the use of collateral. This can help to reduce transaction costs and settlement risk in the call money market.
The RBI is also conducting a pilot project for the retail CBDC, which is a digital version of the Indian rupee. The retail CBDC is expected to be rolled out in the coming months. The retail CBDC is designed to be used by the general public, and it is expected to promote financial inclusion and efficiency in the Indian economy.
The RBI is taking a cautious approach to the introduction of CBDCs, as it wants to ensure that they are safe and secure. The central bank is also considering the impact of CBDCs on the financial system.
The introduction of the wholesale CBDC is a significant step in the RBI’s journey towards a digital currency ecosystem. The CBDC is expected to play a key role in promoting financial inclusion and efficiency in the Indian economy.
Here are some additional details about the benefits of introducing the wholesale CBDC in the call money market:
- It can reduce transaction costs by eliminating the need for collateral.
- It can improve liquidity in the market by making it easier for banks to borrow and lend money.
- It can help to reduce settlement risk by making it easier to settle transactions.
- It can make the market more efficient by reducing the need for intermediaries.
- It can help to promote financial inclusion by making it easier for small businesses and individuals to access credit.
The RBI is still in the process of testing the wholesale CBDC in the call money market. However, the early results are promising, and the RBI is confident that the CBDC will be a valuable addition to the Indian financial system.
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