Digital Currency: Sanjiv Bajaj’s Take On The Future Of Finance

Digital Currency

With the acceleration in the adoption of digital services, the overhaul of the financial sector is imminent. Legacy modalities and operating routes, while relevant today, can limit growth tomorrow. After all, the underpinnings of the new digitally powered society are those of safety, reliability, ease of access, and inclusion. These attributes extend to the financial sector, where inclusion and empowerment are keystones in the developing world, and digital currencies fit the bill perfectly. 

Backed by the right leadership vision and governmental aid, these currencies have the power to shape future economies with centralisation at their core. Commenting on this shift, one of the famous finance personalities in India, Mr. Sanjiv Bajaj, Chairman & Managing Director, Bajaj Finserv, says, “Digital currencies are here to stay, and there is a strong need and a role for digital currency in our country.”

He believes that this shift is favourable even as a sovereign currency, especially in India, ahead of the west in its adoption of digital payments. Such a shift impacts all sectors, lending, retail, or banking. Recently, the Finance Minister committed to launching India’s Central Bank Digital Currency (CBDC), the digital rupee. As sovereign currency in an electronic form, it will be similar to cash in some respects but revolutionise finance in many others.  

Read on for deeper insights into this next-gen solution and how it factors into the growing Indian economy. 

1. Establishes a link between the unbanked and the financial system

India has nearly 200 million unbanked adults, and the digital rupee promises to set up a framework for financial inclusion. In theory, one does not need a bank account to hold digital money with the central bank. This is significant because access to traditional banks may not be easy for the unbanked, and also, the risk of losing money due to bank insolvency is eliminated.

Nevertheless, it is crucial to understand that the e-rupee establishes a link and does not propose to solve the problem of financial exclusion. For instance, 60% of India’s unbanked are women — ridding the system of issues like gender-based discrimination or economic inequality is key to making financial inclusion via a CDBC work.

2. Enhances lending within the MSME sector

Unlike physical cash, transactions made with the digital rupee are traceable. So, by using the e-rupee, MSMEs can build a credit profile, which the government can access and assess when approving financing schemes. Moreover, such transactions can be truly instant if they occur within the RBI itself. 

After the 2022 Union Budget, one of the best businessman personalities, CII President Designate Sanjiv Bajaj, pointed to the cost inflation in the current system: “The physical banking network which costs a lot of money is no longer required for payments”. Importantly, famous financial leaders also suggest that digital currencies can reduce systemic costs MSMEs incur even with existing digital payment solutions. However, the cost reduction depends on how much of the existing delivery channels India’s CBDC will use or sidestep. 

3. Enables solutions like programmable payments or DBTs

Since it can be pre-programmed, the digital rupee can make the existing financial benefits more robust. For instance, when issuing a direct benefit transfer (DBT), say for education or fertilisers, the government can ensure the money is used for the purpose.

Depending on the pace of India’s adoption of IoT, one may soon see machines making transactions with our CBDC. For instance, with the right leadership vision, a German financial company Giesecke & Devrient points out, we could even have electric vehicles paying for their own charging.

4. Streamlines financial inclusion even in offline systems

The digital rupee can boost digital transactions in rural India in conjunction with NFC technology. Feature phones are still widespread, and poor internet is a reality. The digital rupee can solve this issue with a two-step process: offline clearing and online settlement. This method is used by the fintech company Crunchfish and is supported by VISA.

5. Provides an additional safeguard against illicit and unsafe activities

India’s CBDC will be backed by blockchain technology. With trackable transactions, the nation can plug the leakage of finance into issues like terrorism and drug trafficking and arrest money laundering. 

Besides, the simultaneous taxation of cryptocurrencies is a strong push towards adopting the CBDC. Sanjiv Bajaj, one of the best finance leaders builder in India of various fintech solutions, speaking on the high volatility of cryptocurrencies, mentioned that volatility “does make you nervous as an individual holding that currency. I’d rather trust the digital currency of my central government,” he says. 

Several famous financial leaders have expressed the value of systems like the CBDC. Many believe this is the only way forward in a digital ecosystem that will soon make trusted solutions like the ATM obsolete. Digital currencies have a lot to offer the Indian economy, and the RBI’s commitment to a CBDC is a welcome move.