Phased implementation of CBDC for wholesale, retail segments in the works, says RBI ED Choudhary

The Reserve Bank of India is working on phased implementation of a Central Bank Digital Currency (CBDC) in both wholesale and retail segment, a top official said on Wednesday.

Addressing the ‘PICUP Fintech Conference’, organised by FICCI, jointly with IBA,  Ajay Kumar Choudhary, Executive Director, RBI said that with the announcement of CBDC in the Union Budget, necessary amendment to the relevant section of the RBI Act 1934 had been made enabling RBI to conduct pilot and subsequent issuance of CBDC. 

He said the Indian fintech market currently stands as a third largest fintech ecosystem in the world, just behind US and China.

“In next five years, the Indian fintech sector is expected to grow with a cumulative annual growth rate of around 22 per cent. Today, the world is looking up to India, as we continue to innovate and lead the way seamlessly imbibing the new age technology without compromising on the safety and security aspects,” Choudhary added.

Growth of fintech

The rapid growth of fintech in India is also a resonance of the accelerated digitisation with the emergence of technologies like AI, cloud computing, big data, ML, etc. This is coupled with the demographic dividend, easier access to mobile, higher internet speed and bandwidth and reduced cost of technological products, he said. 

“Fintech sector in India is nudged by the government, fostered by the regulators, acknowledged by the industry and accepted by the people. Fintech growth in India has been huge with a very high adoption rate as compared with other jurisdictions,” Choudhary added.

He also emphasised that as regulator, it is also important for RBI to identify the risks and challenges associated with all innovations. Central bank has taken several measures to foster innovation in the fintech sector which includes regulatory sandbox, Reserve Bank Innovation hub, etc. “Sustainability is the most critical aspect in fintech sector. RBI has constituted a committee to both examine and suggest measures to address the risks and challenges associated with the fintech ecosystem while continue to foster innovation,” he said.

On the opportunities in the fintech sector, Choudhary said the sector will continue to have responsible innovations which will transform the financial landscape of the country. The growth does not have to be only swift but a sustainable growth and inclusive of all, he added.

Four pillars

Enumerating the four success pillars for fintech, Choudhary said it is imperative to implement responsible innovations which serves the under privileged, corporate governance; make technological advancements that are scalable and interoperable; giving importance to policy on data privacy, consumer protection, cyber security and prevention of financial crime.

AK Goel, Chairman, IBA and MD & CEO, Punjab National Bank said that Fintech have the potential to fundamentally transform the financial landscape and provide consumers with a great variety of financial products at competitive price along with improved efficiency. “The landscape of fintech is changing at lightning speed and this transformation is essential as it impacts everything related to payment, money and banking,” he added.

Amitabh Chaudhry, Chairman, FICCI Banking Committee and MD & CEO, Axis Bank, said that banks have experience, brand recall, legacy and customers’ trust, while fintech bring in the new age expertise and nimbleness needed to make the leap into the digital space. “Many banks are joining with fintech start-ups to upgrade their existing systems and enable smoother operations to deliver a better experience to their customers,” he added.

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