CBDCs have clear edge over other payment systems: Finance Minister Nirmala Sitharaman
NEW DELHI: The Central bank issued digital currencies (CBDC) have some clear advantages over other digital payment systems as payments using CBDCs are final and thus they reduce settlement risks, Finance Minister Nirmala Sitharaman recently said while addressing a fintech event.
“Imagine a UPI system where CBDC is transacted instead of bank balances, then the need for interbank settlement itself is eliminated,” the finance minister said.
Quoting a 2021 BIS survey of central banks, she said that 86% central banks are actively researching the potential for CBDCs, 60% were experimenting with the technology and 14% were deploying pilot projects.
The country’s central bank -Reserve Bank of India - has been working on launching a digital currency based on blockchain technology.
On the progress of RBI’s CBDC, the finance minister said that the banking regulator is looking at the benefits of CBDC and the associated risks, its various design, forms and various use cases.
Reiterating the importance of the fintech industry, the finance minister said that the Indian Fintech Industry would be valued at $150 billion by 2025 almost three times from $50-60 billion in 2020.
She said that the government has laid the grounds for a fintech revolution in the country by implementing JAM (Jan Dhan-Aadhar-Mobile) trinity, and National Broadband Mission (through which all villages will be connected with high-speed internet).
The fintech sector in India has seen record investment because of the digital infrastructure that the government has already created.
In 2020-21 alone, fund flows saw a 200% growth. As many as $9.03 billion were raised by Indian fintech companies through 410 equity funding rounds in 2020-21, up from $2.83 billion across 303 rounds previous years, she said.
Payment companies have received more than $4.11 billion in FY21, which shows that payment-based
fintech companies are not left behind.
She further said that there are 6,300 fintech companies in India, one out of every four Unicorn are from the fintech segment, and 3% of the recognized start-ups are in the fintech space.