KATHMANDU: With growing public interest in electronic payments, South Asian countries are increasingly considering issuing digital currencies. While most South Asian nations, including Nepal, are still conducting feasibility studies and technology tests, India has already piloted electronic currency, according to a study report.
As central banks worldwide strive to modernize payment systems, reduce the costs of cash transactions, and enhance financial inclusion through electronic currency, South Asian countries are following suit. This interest is highlighted in a report by the South Asian Financial Inclusion Initiative Project titled "Payment Innovation and Risks in South Asia."
According to the report, India introduced a test version of its digital currency, the digital rupee, in November 2022. Other countries in the region are still researching the feasibility of digital currency issuance. Bangladesh Bank is assessing the feasibility, Nepal Rastra Bank is preparing a legal draft, and Pakistan is testing technology for electronic currency transactions. Bhutan, the Maldives, and Sri Lanka are also conducting studies.
The increasing public interest in electronic currencies, including private sector cryptocurrencies, has prompted central banks to explore issuing Central Bank Digital Currencies (CBDCs). The study focused on new innovations and risks in the payment sector within South Asian countries. It noted that the COVID-19 pandemic accelerated the general public's attraction to electronic payments, a trend supported by government initiatives. QR code-based technology has become particularly popular for electronic payments.
In Nepal, both electronic transactions and paper-based payments have increased. Payments made through paper grew by 37 percent from 2018 to 2022. Despite limited access to smartphones and the internet in rural areas, mobile banking transactions without internet have facilitated electronic transactions.
The report highlights that 32.1 percent of the population in South Asian countries lack access to financial services, the highest in Bangladesh at 47.2 percent. In Nepal, 46 percent of the population does not have access to banking services. Additionally, 25.05 percent of women and 20.95 percent of men in the region lack banking access.
Dr. Dilliram Pokharel, deputy spokesperson for Nepal Rastra Bank, informed that the bank formed a steering committee for electronic currency in 2078 under the coordination of Deputy Governor Bam Bahadur Mishra. A committee led by Director Anuj Dahal submitted a feasibility study report in June 2079. Following the report's recommendations, a separate unit has been established in the Payment System Department to work on CBDC development.
The central bank stated that further work on issuing CBDC will continue based on the feasibility study as part of the current fiscal year's monetary policy. NRB Governor Maha Prasad Adhikari has hinted that the central bank aims to issue its own CBDC within three years.
