Sethurathnam Ravi on India’s CBDC Revolution: Building a Trusted Digital Currency Future

CBDCs can reshape India’s financial landscape by enhancing inclusion, transparency, and efficiency—if built on trust, innovation, and strong policy safeguards.

India stands at the cusp of a transformative era in finance with the emergence of Central Bank Digital Currencies (CBDCs)—state-backed digital currencies that promise to revolutionize how individuals save, spend, and make payments. While cryptocurrencies remain unregulated and volatile, CBDCs operate under the control of central banks, offering the potential to infuse greater transparency, efficiency, and financial inclusion into the system. With the RBI’s pilot scheme already onboarding 5 million users by mid-2024, the momentum for CBDCs is undeniable. However, with this opportunity comes the responsibility to ensure trust, security, and economic stability.

India’s CBDC Revolution

Why CBDCs Are Crucial for India’s Financial Future

As digital transformation accelerates globally, India’s financial infrastructure must adapt. CBDCs can address inefficiencies in traditional banking, reducing reliance on physical cash and supporting a seamless, secure digital economy. Over 134 countries, including all G20 nations, are actively exploring or piloting their own CBDCs. For India, this is not just about technology—it’s about empowering citizens, strengthening policy, and building a resilient economy.

Key Advantages of CBDCs in the Indian Context

Smarter Monetary Policy

CBDCs enable the Reserve Bank of India to respond swiftly to economic changes through real-time data access. This leads to faster interest rate adjustments and improved management of inflation and liquidity.

Speedier, Lower-Cost Cross-Border Payments

India receives the highest remittances globally. CBDCs can reduce remittance processing from days to seconds and lower transaction fees—benefiting millions of Indian households.

Financial Inclusion

CBDCs have the potential to bring banking services to unbanked populations, particularly in rural areas, through the use of mobile-based digital wallets and increased financial literacy.

Increased Security and Privacy

Backed by central banks and fortified by advanced encryption, CBDCs offer enhanced security. With privacy-oriented designs, they maintain user confidentiality while ensuring transparency in transactions.

Stronger Regulation and Supervision

CBDCs can play a crucial role in combating black money, tax evasion, and fraud, promoting greater financial transparency and regulatory oversight.

The Challenges Ahead for India’s CBDC Ecosystem

Public Trust & Surveillance Concerns

A key challenge is the perception of surveillance. Users fear that every transaction might be tracked by the government. Transparency, legal safeguards, and privacy-focused frameworks are essential to building trust in CBDCs.

Impact on Traditional Banks

If citizens move funds directly into CBDC wallets, it may reduce bank deposits and lending capacity. A hybrid CBDC model—where banks manage CBDC flows—can mitigate this risk.

Infrastructure and Investment Needs

Widespread CBDC adoption requires investment in secure digital wallets, reliable internet infrastructure, and updated data privacy legislation, especially in rural and semi-urban India.

Systemic Risks in Times of Crisis

In financial emergencies, rapid fund shifts to CBDCs could mimic a digital bank run. Carefully implemented controls—such as holding limits or interest disincentives—are vital to prevent systemic disruption.

Conclusion: The Future of Money is Digital and Inclusive

CBDCs offer India a unique opportunity to lead the global shift toward a secure, inclusive, and transparent digital financial system. However, success lies not in the technology alone—but in a people-first approach that combines trust, security, and inclusive growth.

With coordinated action among the RBI, government, financial institutions, and citizens, India can ensure that the digital rupee becomes more than a tool—it becomes a symbol of national financial empowerment.

Author Details:
S. Ravi (Sethurathnam Ravi)
Promoter and Managing Partner of Ravi Rajan & Co. LLP
Former Chairman of the Bombay Stock Exchange