Promoting Financial Inclusion through Central Bank Digital Currency: An Evaluation of Payment System Viability in India

Abstract

The Reserve Bank of India (RBI) is considering introducing a Central Bank Digital Currency (CBDC). According to studies, India's financial system plays a major role in the execution of the CBDC. India is at the forefront of technological advancements in digital payment methods. The central banks that support CBDC's design concept are susceptible to adaptations to the evolution of economic and financial systems. This study will highlight the potential of CBDC to boost financial inclusion. Quantitative regression analysis is being used to quantify the potential drivers of financial sector efficiency and stability to measure the impact of CBDC implementation on financial inclusion. The central bank should build the CBDC utilizing the Structural Vector Auto-Regression model while considering payment system visibility. The proposed study can help to identify the lags in attaining financial inclusion in India and to design CBDC. The proposed study can also establish the policymakers' role in maximizing benefits to the consumers. The study establishes the potential role of RBI in the smooth functionality of implementing CBDC. The study brings out the trend of the payment system in India that opens up the possibility of positive implementation of CBDC and its welfare to percolate among consumers.

The rise in popularity of central bank digital currencies. A systematic review

“…Following COVID-19, the payment landscape changed and a shift towards cashless transactions happened, with citizens increasingly using means of electronic payment [ 42 ]. CBDCs would take the trend one step further [ 41 , [43] , [44] , [45] ].…”

The Role of Financial Sanctions and Financial Development Factors on Central Bank Digital Currency Implementation

“…Similarly, India's ACC in 2021 was 27.44%, a decline from the 30.62% reported in 2017 [12]. Notably, India entered the pilot phase of implementing the Digital Rupee on 1 December 2022, marking a significant milestone in its digital currency journey [53]. Concurrently, Jamaica has already made strides by launching JAM-DEX, further emphasizing its commitment to digital financial innovations.…”

Shaping the Future of Money: Public Perceptions on Central Bank Digital Currencies and the Digital Rupee

“…One of the central themes addressed in the paper is the need for a nuanced approach to supervisory resource allocation in response to the proliferation of digital currency options. (Banerjee & Sinha, 2023) the author addresses the Reserve Bank of India's (RBI) contemplation of introducing a Central Bank Digital Currency (CBDC). The abstract highlights India's significant role in the execution of CBDCs, particularly due to its position as a leader in technological advancements in digital payment methods.…”