Page 46 - Banking Finance February 2023

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would be presumed to own them. In contrast, an account- As per recommendations of the internal Working Group
based system would require maintenance of record of (WG) set up by Reserve Bank in October 2020, RBI is
balances and transactions of all holders of the Central Bank exploring the option of implementation of account-based
Digital Currency and indicate the ownership of the monetary Central Bank Digital Currency in Wholesale segment and
balances. Also, in a token-based Central Bank Digital token-based Central Bank Digital Currency in Retail segment
Currency, the person receiving a token will verify that his vide a graded approach.
ownership of the token is genuine, whereas in an account-
based Central Bank Digital Currency, an intermediary verifies The payment of positive interest would likely enhance the
the identity of an account holder. Considering the features attractiveness of CBDCs that also serves as a store of value.
offered by both the forms of CBDCs, a token-based CBDC is But, designing a CBDC that moves away from cash-like to a
viewed as a preferred mode for CBDC-Retails as it would be "deposit-like" it may have a potential for disintermediation
closer to physical cash, while account-based CBDC may be in the financial system. It will be resulting from loss of
considered for CBDC-Wholesale. deposits by banks, reducing their credit creation capacity in
the country. Also considering that physical cash does not
There are two models for issuance and management of Central carry any interest, it would be more logical to offer non-
Bank Digital Currency viz. direct model (Single Tier model) and interest bearing Central Bank Digital Currency. Reserve Bank
indirect model (Two-Tier model). A Direct model would be the of India should take decision after detail study of the interest
one where the central bank is responsible for managing all of the nation in general and all stack holder in particular.
aspects of the Central Bank Digital Currency system viz.
issuance, account-keeping and transaction verification. For CBDC to play the role as a medium of exchange, it needs
to incorporate all the features that physical currency
In an Indirect model, central bank and other intermediaries represents including anonymity, universality, and finality. RBI
(banks and any other service providers), each play their has to develop such a system in which all these features can
respective role. In this model central bank issues Central be associated with Central Bank Digital Currency.
Bank Digital Currency to consumers indirectly through
intermediaries and any claim by consumers is managed by Conclusion:
the intermediary as the central bank only handles wholesale
There are associated risks, no doubt, but they need to be
payments to intermediaries. RBI is yet to take final decision
carefully evaluated against the potential benefits.
on this matter.
Reference:
CBDCs being digital in nature, technological consideration
(Dyson and Hodgson, 2016).
will always remain at its core. The infrastructure of CBDCs
can be on a conventional centrally controlled database or Bank for International Settlements (March 2018).
on Distributed Ledger Technology. Reserve Bank of India has Reserve Bank of India (Concept Note: 2022).
to decide on the matter considering the available Several articles published in The Hindu, Economic Times,
infrastructure. and Business Standard.

Govt expects Rs 48,000-cr dividend from RBI, PSU banks in FY24
The government expects 17 per cent higher dividend at Rs 48,000 crore from the Reserve Bank of India (RBI), public
sector banks and financial institutions in 2023-24. In current financial year ending March, it aims to garner Rs 40,953
crore from RBI and public sector financial institutions. This is much lower compared to Budget Estimate of Rs 73,948
crore for FY23. It is to be noted that RBI approved a dividend payment of Rs 30,307 crore to the government post its
board meeting in May 2022.
As per the Budget document, dividends from public sector enterprises and other investments have been pegged at Rs
43,000 crore for FY24 as well.As per the Revised Estimate for FY23, the dividend from public sector enterprises and
other investments was higher at Rs 43,000 crore from the Budget Estimate of Rs 40,000 crore.

40 | 2023 | FEBRUARY | BANKING FINANCE