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CBDC Pilot Programmes for CPs and CDs
Context
RBI may come up with the pilot programs for Central Bank Digital Currencies (CBDCs) in commercial papers (CPs) and certificates of deposits (CDs).
More on News
- The RBI Governor stated that one million daily retail transactions are made using Central Bank Digital Currency (CBDC) interoperable with UPI, though UPI remains the preferred choice for most users.
- He emphasised boosting CBDC transactions to grasp their full impact on the economy, especially on monetary policy and the banking sector.
Types of Market Securities (CDs, CPs, etc.)
- Certificates of Deposit (CDs): CDs are fixed-term, fixed-interest time deposits that banks and other financial organisations offer. Investors make deposits for a set length of time, after which they cannot withdraw the funds without penalty.
- Generally, CDs provide greater interest rates than standard savings accounts.
- Commercial Paper (CPs): Issued by governments, financial organisations, and corporations, CPs are short-term debt instruments used to raise money for unforeseen expenses. They are normally issued at a discount to face value, with maturities varying from a few days to a year.
- Corporate bonds: Corporate bonds are debt instruments that companies issue in order to raise money. They may pay fixed or variable interest rates, and they usually have longer maturities than commercial paper.
- Based on the creditworthiness of the issuer, credit rating organisations assign a rating to corporate bonds; higher-rated bonds are deemed to be safer investments.
- Stocks, or equity shares: Stocks, often known as equity shares, are certificates of ownership in corporations. Upon purchasing stock, investors turn into a part owner of the business and are eligible to receive dividends representing a piece of the profits.