Will digital rupee be more cost-effective than minting banknotes?

There are certain operational costs involved in printing, distributing and storing banknotes.

Sangeeta Ojha
First Published14 Feb 2022
Another benefit of digital currency is that they do not get torn, burnt or physically damaged. 
Another benefit of digital currency is that they do not get torn, burnt or physically damaged. ;(Pixabay)

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.

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.MoreLess
HomeIndustryWill digital rupee be more cost-effective than minting banknotes?

Most Active Stocks

Ashok Leyland

227.05
09:51 AM | 27 MAY 2024
16.5 (7.84%)

Bharat Electronics

294.50
09:51 AM | 27 MAY 2024
-2.6 (-0.88%)

Zee Entertainment Enterprises

149.15
09:51 AM | 27 MAY 2024
-2.5 (-1.65%)

Tata Steel

175.75
09:51 AM | 27 MAY 2024
0.95 (0.54%)
More Active Stocks

Market Snapshot

  • Top Gainers
  • Top Losers
  • 52 Week High

Indian Overseas Bank

73.75
09:41 AM | 27 MAY 2024
6.52 (9.7%)

Clara Industries

240.00
09:37 AM | 27 MAY 2024
19.35 (8.77%)

Vishnu Prakash R Punglia

173.75
09:41 AM | 27 MAY 2024
13.35 (8.32%)

Astrazeneca Pharma India

6,485.10
09:38 AM | 27 MAY 2024
473.35 (7.87%)
More from Top Gainers

Recommended For You

    More Recommendations

    Gold Prices

    • 24K
    • 22K
    Bangalore
    74,045.00216.00
    Chennai
    73,613.00288.00
    Delhi
    73,180.00-72.00
    Kolkata
    73,325.00-144.00

    Fuel Price

    • Petrol
    • Diesel
    Bangalore
    99.84/L0.00
    Chennai
    100.85/L-0.03
    Kolkata
    103.94/L0.00
    New Delhi
    94.72/L0.00
    OPEN IN APP
    HomeMarketsPremiumFor youGet App