Digital Rupee – Emergence of New Monetary Era

Abstract

On 1st November 2022, RBI launched the Pilot project of introducing the operationalization of wholesale digital rupee. The digital currency backed by the central bank of the country. It is the electronic form of money , generally today the UPI payments we are doing are nothing but the kind of online substitute to the physical form of money i.e. cash. If you don’t have deposit in your banks and support of reserve bank of India; Then such kind of upi payments are useless. To liquidate or settle any transaction cash is the sole authentic mean for activity. In this article, we will look at the journey of money throughout the history pages; The need of transaction, changing nature of money, multi-characteristics of money and the new upcoming era of digital money. Initially human utilized the money in the form of barter, where people were just exchanging own commodities with other commodities . As transactions started to become more complex and diverse , then the requirement of more solid and stable medium of exchange raised. Even in this century , the money witnessed the various evolutionary changes in such short span of time. From new currencies to virtual payments to cryptocurrency; Even the financial markets developed large number of asset forms and papers, which are kind of close alternatives of money for daily transactions. In all these developments, the changing nature of monetary policy , strategies get much affected and more challenged by the social upheavals. Numerous central banks are debating whether to launch their own digital currency (CBDC). A CBDC may have a number of advantages, including the opportunity to earn interest. By introduction of pilot project wholesale digital rupee, RBI has already jumped into the sea of opportunities or challenges. The plan of full-fledged reveal of digital rupee in 2023 is dependent on the success of this pilot project , its estimated impact on the wholesale industry. The banking structure will need new restructuring and formation policies, as this is going to affect people’s day to day life process. Now much kind of questions like the rates, bank rate policies, deposit categories are going to be same? Or they need special kind of conditioning? The comparative study between crypto and digital rupee is also needed for the smooth and hassle free functioning central bank digital currencies (CBDC). In the pandemic , the lockdown situation brought this new challenge of contactless world. How to carry daily financial chores , pushed this need of virtual world. The introduction of central bank digital currency got kinetic in that need of an hour. In last centuries, the changing world of globalization , international trade made the currency transaction more rich and prosper. Hence such central bank digital currencies will again made international trade more challenging with new kind of structural requirement. It is going to be interesting to see the development of new era of monetary policy regarding he introduction of central bank backed digital currencies.