Former Reserve Bank of India deputy governor SS Mundra is not optimistic about the success of the central bank digital currency (CBDC), or the electronic form of rupee, despite the RBI’s efforts to popularise it.
“If we talk about CBDC vis-a-vis UPI (united payments interface), usage of UPI is already prevalent and I don’t see that CBDC serves any special purpose,” Mundra said here on Friday.
“It’s good to have one (CBDC) though,” he said at a programme to mark Bandhan Bank’s ninth anniversary.
The RBI is looking to make CBDC accessible to a broader retail segment by enabling non-bank payment system operators to offer CBDC wallets even as UPI is gaining currency by the day.
UPI transactions hit Rs 20.64 lakh crore last month, up 35% compared to July 2023. It was the third straight month of over Rs 20 lakh crore of transactions.
Responding to a query related to internationalisation of the rupee, Mundra opined that it cannot happen until the rupee becomes fully convertible. The policy makers are, however, not in favour of making the rupee fully convertible in terms of capital account to prevent any sudden and severe withdrawal of global investment from Indian markets.
During his speech on the future of Indian banking, Mundra said banks need to sit up and reimagine their business models since fintech companies with greater digital capabilities are flooding the market.
A collaboration between the two, however, can be a won-win proposition, he said.
