Sethurathnam Ravi’s Vision for a Secure and Inclusive Digital Currency in India

Central Bank Digital Currencies (CBDCs) are poised to redefine India’s financial ecosystem by driving financial inclusion, improving transparency, and boosting efficiency—when implemented with innovation, trust, and sound regulatory policies.

As India navigates the digital era of finance, the advent of CBDCs—a government-backed digital currency—marks a pivotal shift in how Indians transact, save, and manage money. Unlike cryptocurrencies, which are largely unregulated, CBDCs fall under the regulatory oversight of central banks, ensuring stability and public confidence. The Reserve Bank of India’s CBDC pilot, already engaging 5 million users by mid-2024, is a testament to this growing momentum. Yet, this progress must be met with a commitment to data security, user privacy, and economic resilience.

CBDC

Why CBDCs Matter More Than Ever in India

In a fast-evolving digital world, India’s financial architecture must evolve to match new-age demands. CBDCs bridge gaps in the traditional banking system, reduce dependency on cash, and unlock greater efficiency. Today, over 134 countries—including all G20 members—are exploring CBDCs, highlighting the global shift toward digital currencies. For India, however, this transition is about more than just technology—it's about creating an inclusive, policy-driven, future-ready economy.

Top Benefits of CBDCs for India’s Digital Economy

1. Real-Time Monetary Policy Implementation

CBDCs provide the RBI with instant access to economic data, enabling quicker responses to macroeconomic trends. This empowers the central bank to adjust interest rates, control inflation, and manage liquidity with greater precision.

2. Faster and Cost-Efficient Cross-Border Transactions

India leads the world in remittance inflows. With CBDCs, international money transfers can be completed in seconds, dramatically cutting costs and improving convenience for millions of families.

3. Expanding Financial Inclusion

CBDCs can drive financial access for the unbanked and underbanked, especially in rural and remote areas. By leveraging digital wallets and mobile technology, the CBDC infrastructure can bring more citizens into the formal financial system.

4. Enhanced Security and Controlled Privacy

Backed by strong encryption and the oversight of central banks, CBDCs offer a secure digital payment system. Designed with privacy features, they ensure user identity protection while maintaining transaction traceability for regulatory purposes.

5. Improved Transparency and Regulatory Oversight

CBDCs can significantly curb illicit financial activities, including tax evasion, fraud, and black money circulation, by increasing transparency in digital transactions.

Challenges in India’s CBDC Adoption

1. Gaining Public Trust Amid Surveillance Concerns

Worries about transaction tracking and data surveillance pose a major challenge. To build trust, the government must prioritize privacy protection and transparent communication regarding CBDC usage.

2. Potential Disruption to Traditional Banking

If users transfer funds directly to CBDC wallets, commercial banks could face a drop in deposits, limiting their lending capacity. A hybrid CBDC model—where banks mediate CBDC transactions—can balance innovation with stability.

3. Infrastructure and Technological Readiness

Mass adoption of CBDCs in India will require robust digital infrastructure, including secure wallets, high-speed internet, and strong data protection laws, especially in semi-urban and rural areas.

4. Risk of Digital Bank Runs During Economic Uncertainty

In times of crisis, people may shift large sums into CBDC wallets, creating the risk of a digital version of a bank run. To prevent this, mechanisms like holding caps and disincentive-based interest models should be implemented.

Conclusion: India’s Digital Rupee – A National Asset for the Future

The rise of CBDCs presents a once-in-a-generation opportunity for India to lead the global financial transformation. But success lies not in the technology alone—it depends on a human-centric approach, where innovation supports inclusion, security builds trust, and policy ensures resilience.

With strong collaboration between the RBI, government, financial institutions, and citizens, India can position the digital rupee as more than a payment tool—it can become a symbol of economic empowerment. The future of finance is digital, and India has the power to shape it for generations to come.

Author Bio

S. Ravi (Sethurathnam Ravi)

Promoter and Managing Partner, Ravi Rajan & Co. LLP

Former Chairman, Bombay Stock Exchange