NEW DELHI: The central bank-issued digital currency (CBDC) has some clear advantages over other digital payment systems, as payments with CBDCs are final and thus reduce settlement risks, Finance Minister Nirmala Sitharaman said at a fintech event recently .
“Imagine a UPI system where CBDC is settled instead of bank deposits, then the need for interbank settlement itself is eliminated,” said the finance minister.
Citing a 2021 BIS survey of central banks, she said 86% of central banks are actively exploring the potential for CBDCs, 60% are experimenting with the technology and 14% are implementing pilot projects.
The country’s central bank – Reserve Bank of India – has been working to launch a digital currency based on blockchain technology.
On the progress of RBI’s CBDC, the finance minister said the banking regulator is looking at the benefits of CBDC and the associated risks, its different designs, shapes and different usage scenarios.
The finance minister reiterated the importance of the fintech industry and said that India’s fintech industry would be nearly three times as high as $50-60 billion by 2025 by 2025.
She said the government has laid the groundwork for a fintech revolution in the country by implementing the JAM trinity (Jan Dhan-Aadhar-Mobile) and the National Broadband Mission (connecting all villages to high-speed internet).
India’s fintech sector has seen record investments due to the digital infrastructure that the government has already created.
Money flows saw a 200% growth in 2020-21 alone. A whopping $9.03 billion was raised by Indian fintech firms through 410 equity financing rounds in 2020-21, up from $2.83 billion in 303 rounds in previous years, she said.
Payment firms received more than $4.11 billion in FY21, demonstrating that payment-based
Fintech companies are not lagging behind.
She further said that there are 6,300 fintech companies in India, one in four Unicorn is from the fintech segment and 3% of recognized start-ups are in the fintech space.