Digital rupee has wider scope but it can't replace physical currency: SBI chief

Dinesh Kumar Khara

The scope of the digital rupee is under close watch since the central bank digital currency (CBDC) was rolled out, according to State Bank of India Chairman Dinesh Khara.

"The scope can be further enlarged by including financial institutions such as mutual funds or insurance services, when they actively participate in settlements of government securities (G-Sec) or state developmental loans, " Khara said at the Financial Inclusion and FinTech Summit organised by the Confederation of Indian Industries (CII) on July 19.

"It is a very valid case. CBDC will take away a part of the physical currency circulation, as well as bring efficiency in settlements," he said.

He noted that after the recent pilot of the digital rupee, during which a liquid network was created across the country, there was decent traction in retail settlements as well. "Considering the reduced cost of currency management and formalisation of the country's economy, this will go a long way," said the SBI chief.

But he pointed out that CBDC would not be a substitute for physical currency. "For a country of our size, CBDC cannot replace physical currency. There is a scope and case for the co-existence of both physical currency and digital rupee."

Khara, however, said the inclusion of CBDC is anticipated to help boost the increasing GDP of the country.