The Impact of Central Bank Digital Currency on Indian Monetary Policy

Abstract

Background and Purpose: As central banks globally explore the implementation of Central Bank Digital Currencies (CBDC), India has initiated a phased rollout of its Digital Rupee. While technological and regulatory dimensions of CBDC have received attention, empirical understanding of its perceived impact on monetary policy transmission remains limited. This study aims to evaluate public awareness, usage patterns, and perceptions of the Digital Rupee, with a focus on implications for India's monetary policy framework. Methods: A cross-sectional, quantitative survey was conducted among 320 Indian adults using a structured online questionnaire. The instrument measured CBDC awareness, adoption intent, perceived benefits, risks (including policy transmission, disintermediation, financial inclusion, and privacy), and views on key technological features. Descriptive statistics, ANOVA, and Partial Least Squares Structural Equation Modeling (PLS-SEM) were used for analysis. Results: Our findings revealed that respondents exhibited high awareness of the Digital Rupee (85%) but limited direct pilot usage (28%). They strongly supported using CBDC for faster and more targeted fiscal transfers (mean = 5.2/7) and endorsed key features such as offline capability (mean = 6.1) and programmability (mean = 5.8). However, concerns about potential bank disintermediation (mean = 4.8) and systemic stability risks (mean = 4.5) were also prominent. Views on cross-border use and legal safeguards indicated moderate interest alongside notable knowledge gaps. Discussion: The study highlights both the enthusiasm and reservations surrounding CBDC adoption in India. Key insights include the need for seamless UPI integration, tiered wallet caps, and public trust mechanisms to preserve financial stability. Strategic policy design balancing innovation with inclusion and privacy is essential to ensure the Digital Rupee complements India’s existing monetary tools without destabilizing its banking ecosystem.