Published On: Wed, Mar 18th, 2020

Cryptocurrency may be the Only Way for Indian Depositors

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Trust in the Indian banking system has been under doubt for quite a while. We should be open to new ideas of regulating currency, rather than attempting to reestablish trust, it might be an ideal opportunity to require less of it — with the assistance of an official rupee cryptographic money.

The event that surely acted as the final nail in the coffin is the fall of a corporate moneylender, YES Bank, which bombed in swift and slow movement as per the experts. The government has been criticized for having not taken action earlier. Depositors have been guaranteed that their $20 billion or more that is stuck will be discharged after a rescue plan from the State Bank of India, which further includes more investors.

While that may help settle across the troubling alarm, it is evident that there will be major goodwill consequences of this incident. People will find it challenging to keep all their savings in the banking sector due to the fear of default.

It will be both troublesome and expensive to revive the people’s diminishing confidence. Additionally, it is ridiculous to expect that the YES Bank humiliation would trigger an improvement in the state of affairs.

Not all hope is lost, though. India can look to move towards a central digital currency that would protect the people from any such defaults. China was first in line in launching its own central bank digital currency, but it is obvious that there will be a delay due to the coronavirus outbreak.

India can take this opportunity to tackle its inherent loopholes. After the YES Bank and its rescue, people in India will most likely incline toward four or five huge moneylenders, whose chiefs might be encouraged to make unsafe and risky bets with others’ cash. The rest of the banks will battle for liquidity.

As per the 17 surveys far and wide — from Norway and Sweden to China, Cambodia, and South Africa — the Bank for International Settlements has recognized four potential methods for a national bank digital currency.

Out of these options, the best way to digitalize the cash is through a rupee token. A token doesn’t require the person to have an account with anyone, but it has value ensured by the Reserve Bank of India. This could be the beginning stage. Afterward, the RBI can open up the approval of exchanges to approved persons on circulated ledgers.

Presently a bank account holder needs to depend on everybody from the bank’s administration and board to the auditors, the rating firms, and the RBI to carry out their responsibilities. At the point when they all fail, the bank’s checkbook, ATM card, and everything would stop providing liquidity. Bank Deposits quit being equivalent to money, regardless of whether the state ensures their wellbeing.

If the RBI doesn’t take necessary actions to make digital rupees available and leaves us to worry about the banks always, then it will be a significant loss of opportunity.

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