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A digital currency/rupee is likely to save operational costs of printing, distributing and storing banknotes for the Reserve Bank of India (RBI). There are certain operational costs involved in printing, distributing and storing banknotes. These expenses can be reduced if additional currency issued is replaced by digital legal tender.

Will digital currency be more cost-effective than minting notes?

Cash usage will be replaced to a larger extent when digital currency becomes operational in India, hence reducing the costs of printing currency notes.

"Digital currencies can provide a more efficient infrastructure money transfer. Due to sustained inflation and economic growth, the increase in the money supply is sure. However, with the introduction of digital currency, cash usage can be replaced by it to a larger extent, resulting in the removal of the cost of printing, transporting, storing and distributing currency. Ultimately, it will reduce the cost involved in managing and moving money around the economy," said Archit Gupta, Founder and CEO of Clear

Digital currency will not require paper, metals in order to manufacture physical currencies thus reducing costs," said Manoj Dalmia, Founder and Director, Proassetz Exchange

Sumit Gwalani, Co-Founder, Neobank Fi said there are certain operational costs involved in printing, distributing and storing currency notes. With notes worth 28.3 lakh crore in circulation as of March 2021, these costs run into hundreds of crores. These expenses can be reduced if additional currency issued is replaced by digital legal tender. 

However, it depends on what ledger system the RBI chooses to go with. Distributed ledgers like blockchain involve high power consumption and will incur corresponding costs, he added.

With the issuance of digital currency, the need for the minting of notes and coins will reduce thereby saving the cost.

“With the issuance of digital currency, the need for the minting of notes and coins will reduce thereby saving the cost of printing paper, transportation, handling, secured storage etc. However, it will be prudent to conduct a comparative analysis in terms of the cost of creating and maintaining digital rupee infrastructure vis-à-vis physical currency infrastructure," said Mihir Gandhi, Partner & Payments Transformation Leader, PwC India.

Benefits of Digital Rupee

Apart from reducing the transaction cost, having a digitized currency will make it easier for governments to access all transactions happening within the authorized networks. “It will become impossible to avoid the gaze of the government, thus subjecting every transaction to relevant laws within the country. Hence, the government will have better control over how money leaves and enters the country, which would allow them to create a space for better budgeting and economic plans for the future, and overall a much safer environment," said Archit Gupta.

Another benefit of digital currency is that they do not get torn, burnt or physically damaged. Neither can they be physically lost. “The lifeline of a digital currency will be indefinite compared to physical notes," he added.

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