What are Central Bank Digital Currency (CBDC) Benefits in India ?
25 June, 2024
Synopsis
Central Bank Digital Currency (CBDC) is a central bank-run digital alternative to traditional cash.
The advantages of CBDC are that it streamlines transactions, enhances financial inclusion, increases security and transparency and opens new avenues for monetary policy, all while being easily accessible for both personal and commercial use.
This digital currency is supported by robust encryption and authentication.
The Reserve Bank of India (RBI) has introduced its groundbreaking Central Bank Digital Currency (CBDC), also known as the Digital Rupee or e₹. This initiative marks a significant step in the evolution of currency, offering a digital alternative to physical cash.
As a customer of HDFC Bank, you're invited to be part of this digital revolution. Now you can pay for your expenses and transfer money to friends and family digitally through the HDFC Bank CBDC app. With CBDC, you get the stability and reliability of cash along with the ease and efficiency of digital transactions.
This is your chance to be one of the privileged customers to transact using CBDC with HDFC Bank. Check out its benefits and get started today.
What are the Advantages of CBDC?
Let's take a look at the advantages of CBDC and how you can leverage them.
Ease of Transactions
One of the key CBDC advantages is the simplicity and speed of transactions. Whether you're paying for goods and services, sending money to friends and family or receiving payments, e₹ ensures instant and hassle-free transactions.Better payment efficiency and accessibility
CBDCs can facilitate instant transactions and drastically reduce the time and costs associated with cross-border payments. This efficiency transcends the need for traditional intermediaries like banks or payment processors, providing a streamlined, secure and efficient way of conducting transactions.Heightened security and transparency
CBDCs can offer increased security and transparency. With robust encryption and authentication protocols, they are well-equipped to combat fraud and cyber threats. Furthermore, the transparent nature of CBDCs ensures a meticulous record of transactions which aids in the prevention of money laundering and other illicit activities.Minimising cash handling risks
The advantages of CBDC extend to mitigating the costs and risks associated with handling physical cash. By reducing the need for cash handling and transportation, CBDC can potentially cut down expenses and security risks. They also play a crucial role in curbing counterfeiting and theft, common issues with physical currency.Offline availability
Another potential benefit of CBDC in India is that it could also work in areas with no internet availability, whether you are in an underground parking lot, on a flight or in a metro. You could simply place your phone next to the payment terminal at the merchant store and make the payment. This feature can be backed by Near Field Communications (NFC) or Bluetooth technology.Ability to programme CBDCs for specific purposes
RBI has provided the option of programming CBDC by tying it to a specific end-use. For instance, when an individual avails of credit from a bank specifically for agricultural purposes, the digital currency can be programmed in a way that the individual uses the credit only for agricultural purposes. This can address the issue of diversion of funds and facilitate financial inclusion for MSMEs. An organisation may issue programmable CBDCs to its employees. This way, employees can use the CBDCs to make payments for specific purposes, at specific locations.Strengthening financial inclusion
Another significant benefit of Central Bank Digital Currency is its potential to boost financial inclusion. For many individuals who lack access to conventional banking services, CBDC can offer a reliable, secure and cost-effective method to store and transfer funds. This aspect is especially beneficial in regions with limited banking and internet infrastructure, reducing dependence on physical cash. You can transact with CBDC without relying on the internet as well.
How Does CBDC Work?
The process begins with the RBI creating tokens, which are then distributed to banks participating in the Digital Rupee Pilot Programme.
These banks, or Token Service Providers (TSP), make the tokens available to customers.
The Digital Rupee tokens function similarly to banknotes or coins, and you can store them in your bank's digital wallet, the HDFC Bank Digital Rupee app.
What are the Uses of Digital Rupee?
As a participating retailer or customer, you can carry out person-to-merchant (P2M) and person-to-person (P2P) transactions using e₹. Additionally, you can make payments to retailers by scanning QR codes displayed at their premises. For example, you can settle bills for your purchases at retail shops and shopping centres and transfer funds between accounts. In essence, e₹ can be utilised in the same manner as cash.
What is the Difference Between e₹, Cash, UPI and Cryptocurrency?
Here’s how e₹ differs from cash, UPI and cryptocurrency:
Cash vs. e₹: e₹ operates much like cash but in a digital form.
UPI vs. e₹: Unlike UPI, which is a payment system, e₹ is a currency itself.
Cryptocurrency vs. e₹: Cryptocurrencies are decentralized assets, while e₹ is a centralised digital currency backed by the RBI
How to Set Up Your Digital Rupee App?
For HDFC Bank customers, setting up a Digital Rupee app is straightforward. Simply download the HDFC Bank Digital Rupee app on iOS and Android (version 10+), and you're ready to start using e₹ in various cities across India. Download Now!
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
