The above is an article from Hindu. You can understand everyth | ECONOMY by VIVEK SINGH

The above is an article from Hindu. You can understand everything about Central Bank Digital Currency (CBDC) by reading my following note which I posted few days back on the channel. https://t.me/VivekSingh_Economy/3098

Few lines at the end of the article I have erased as it may lead to confusion and that may not happen in near future or would be clear only when RBI launches its CBDC. So, do not read that.

Would like to add/explain few points from today's newspaper:

1) CBDCs are just like cash but the only thing is it exists in digital form only. Just like u keep cash with yourself, you can keep CBDC in your e-wallets and it will be liability of RBI towards you and nothing to do with banks. When u keep your cash in bank deposits then its liability of Bank towards you (and its not liability of RBI towards you). If bank goes bankrupt your money is gone.

2) When we deposit Rs. 100 cash in bank then bank keeps only a fraction let us say 20% i.e. Rs. 20 with itself as reserves and it can lend Rs. 80 to someone else and this step creates the money. Because when you were holding Rs. 100 cash, the money supply in the economy was Rs. 100 but when you deposit Rs. 100 in bank then still money with you (in deposit form and not cash form) is Rs. 100 but because of lending some other person also gets Rs. 80, so total money supply becomes Rs. 100 + 80 = Rs. 180. When this person who borrowed Rs. 80 cash from the bank, will again go to bank to deposit then again bank will hold only 20% of Rs. 80 in reserves and rest it will lend and this process continues and money gets created much more than what was the initial cash (printed by RBI).

If because of CBDCs.. people do not deposit cash in bank (or less deposits) and hold the currency in digital form then banks won't be able to lend BUT when people will hold CBDC with them then they will not get interest, just like when you hold cash you do not get interest.

My previous note and today's one covers everything about CBDC and no need to read any other article till RBI actually creates its CBDC.