Q.3 What is a Central Bank Digital Currency (CBDC)? What are the benefits and concerns associated with it? (10 Marks)

Mentor’s comment-
  • https://indianexpress.com/article/opinion/editorials/budget-rbi-digital-rupee-7755577/
  • In the intro, mention the announcement about the proposed introduction of digital currency to be issued by the RBI.
  • In the body, explain digital currency and how it is different from conventional currencies. In the benefits mention financial inclusion, lower costs for financial transactions, , the advantages of an alternate payments system, the creation of another instrument in the monetary policy arsenal of central banks, the likely adverse impacts on corruption and money laundering etc. In the concerns mention implications for banking systems if the CBDC accounts are interest-bearing, question of anonymity etc.
  • Conclude by mentioning that the central bank must proceed cautiously, remaining mindful of the various issues, the design considerations and the implications.

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priyanka kumari
priyanka kumari
7 months ago

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