One of the biggest announcements in the fourth Budget speech by Finance Minister Nirmala Sitharaman has been the proposal to introduce the Central Bank Digital Currency by issuing digital rupee using blockchain technology.
Besides giving a big boost to digital economy, Sitharaman said, "Digital currency will also lead to a more efficient and cheaper currency management system. It is, therefore, proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India (RBI) starting 2022-23."
On Tuesday, the minister also announced setting up of digital banking units and online transfer of funds between post office accounts and bank accounts, among other initiatives, thus opening an array of opportunities for financial technology companies.
Sitharaman proposed to set up 75 digital banking units in 75 districts of the country by scheduled commercial banks (SCBs). The finance minister also announced inclusion of all the 1.5 lakh post offices in the country’s the core banking system to enable financial inclusion and access to accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts.
"We strongly appreciate the government’s decision to set up 75 digital banking units in the country. This will help promote digital payments aggressively in the country and drive financial inclusion further. The introduction of RBI approved digital rupee is another landmark move- it will disrupt the Indian payment system and add a new dimension to the financial system. 'One Nation, One Registration' is a great initiative as it will facilitate ease of living & doing business," said Suhail Sameer, CEO, BharatPe, which owns Unity Small Finance Bank in partnership with Centrum Group.
“The financial support for digital payment ecosystem announced in the previous Budget will continue in 2022-23. This will encourage further adoption of digital payments. There will also be a focus to promote use of payment platforms that are economical and user friendly,” Sitharaman said in an over one-hour long speech.
The finance minister’s digitisation push comes at a time when the fintech sector has seen massive disruption over the last two years with the onset of the Covid-19 pandemic, which boosted demand for digital payments and other financial services.
Many companies in the fintech space have raised funds aggressively at high valuations over the last two years. India currently has over 10 startups or new-age technology companies valued at over $1 billion catering to the fintech segment. Moreover, fintech firms raised nearly four times as much capital in CY21 as they did in CY20, garnering about $3.9 billion in CY21, an increase of 86% over the $2.2 billion raised in CY20, VCCircle had reported, citing a report from PwC India.
“The nation has been bullish with digital payments, and the current budget has further fuelled the same by announcing 75 digital banking units in 75 districts. Inclusion of 1.5 lakh post offices under banking system with digital infrastructure enablement will promote financial inclusion, and accelerate shifting micro economy in the mainstream banking system,” said Dr Navneet Gupta, Founder and Chief Executive Officer at YPay, Noida-based fintech startup backed by venture capital.
Digital Rupee will further reduce friction in movement of money, reducing the cost of money and in the long-term contributing to fueling economic growth, according to Rajeev Aggarwal, Founder at Innoviti Payment Solutions Pvt Ltd.
