Budget 2023: In the last few years, India has been at the forefront of digital payment innovations, especially with UPI drawing the attention of the world with its scale and rapid adoption. Rupee in its new digital avatar is the latest in the line of innovations that the regulator and the government is rolling out. Union budget 2022-23 announced the launch of digital rupee and Finance Act 2022 made amendments to Reserve Bank of India Act 1934 (RBI act) to expand the definition of “bank note” to include banknotes issued in digital form. In October 2022, the Reserve Bank of India released a concept note on Central Bank Digital Currency (CBDC) to explain the objectives, choices, benefits, and risks of issuing a CBDC in India. Subsequent to this, RBI initiated pilot projects for the to test the usage of digital rupee in wholesale and retail markets. This is significant because a Central bank Digital Currency is disruptive in many aspects. While India has made strides in digital payments, a large portion of the population remain outside digital payments ambit. As per Global Findex report by World bank, around 67 Crore adults with a bank account in India made no digital merchant payment. This may be corroborated by the fact that there are 26 Crore unique UPI users in India, a number which is indeed huge, but less than 20% of the population. We can assume, with some level of confidence that the rest of the population is transacting in cash, if they are not already on UPI. These segments include the under banked and unbanked along with the citizens in banked segment who are not comfortable using UPI apps.
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Retail digital rupee in its current form, with
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