We've seen a digital currency silently launched in India; it is massive: Yes Bank's Ajay Rajan

Yes Bank's Ajay Rajan talks about the transformative potential of the CBDC

Published: Jun 6, 2023 10:25:11 AM IST

Updated: Jun 6, 2023 11:05:13 AM IST

Ajay Rajan, head of digital banking and transformation, Yes Bank

Yes Bank was one of the earliest banks to participate in the Reserve Bank of India’s (RBI) Central Bank Digital Currency (CBDC) retail pilots, starting December 2022. The scope of these pilots is being expanded each week in terms of peer-to-peer (P2P) and peer-to-merchant (P2M) adoption and usage. Ajay Rajan, Yes Bank’s head of digital banking and transformation, says the response from customers to the pilot has been good and talks about the scope of CBDC, its use cases and how it will co-exist with UPI in the payments ecosystem.

Excerpts of a conversation with Forbes India:

Q. How is the climate shaping up for the CBDC in India?

Since the retail pilot launches, they are being tested in terms of features, strategy, scale and adoptability. The emphasis is now to see how the CBDC works on a technical and digital architecture, its acceptance by people and how they are reacting to it.

India already has a successful payment structure in the form of the UPI; we are lucky in those terms to have the best of these two worlds. The UPI, as digital money, is an evolved, sophisticated and successful digital payment mode. Concurrently, pilots are being run on digital legal currency. Use cases can be created and so can programmability.

Explained: How Central Bank Digital Currency (CBDC) transactions work

In the future, as RBI’s concept paper on CBDC said, it could also be positioned to serve in low- and no-internet connectivity locations. It would take digital penetration and financial inclusion to the absolute next level. In those locations, the trust factor of a legal currency will be far superior to that of a private channel to move money.

Q. What features make CBDC valuable to the Indian banking ecosystem?

CBDC is a secure legal tender backed by RBI directly, hence it has the highest level of trust. It will be accepted as a medium of payment and a safe store of value by all citizens, enterprises, and government agencies. By adopting a digital rupee there will be a reduction in RBI’s expenditure incurred on currency printing and currency maintenance, and also help avoid counterfeiting.

The digital rupee is a convenient alternative to cash with the underlying benefits of denomination selection and anonymity (under WIP as mentioned by the regulator). Physical cash may be lost but the digital rupee is recoverable since it is digitally tagged to the customer and held by the bank as their custodian, duly protected by PIN etc. The digital rupee can be redeemed anytime, has 24X7 availability and is easy to transfer for both P2P and P2M.

Q. How will CBDC co-exist with UPI?

The RBI has not brought in CBDC as an alternative to UPI. It is meant to co-exist with UPI. When UPI came, the IMPS and RTGS payment modes were already there. IMPS volumes have grown equally well in throughput and value. India is a large market for multiple payment modes to co-exist.

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From a merchant perspective, this would be the only digital payment channel which allows real-time instant settlement at no cost. Interoperability with UPI QR is also on the anvil, which is obviously being looked at by the central bank. Once that happens, imagine the manifold increase in the usage of CBDC… there would be no need for a merchant to deploy multiple QR codes. We have actually seen a digital currency silently launched in the country; it is massive.

Q. How is the Yes Bank CBDC pilot app faring?

We are seeing success, but it is the RBI which is best positioned to comment on the performance of the CBDC. We may not be able to share specific app data usage at this stage. The application is available on Google Play and Apple’s App Store. There is no restriction on any Yes Bank customer in the locations specified by the RBI to download the app and register to use it.