Impact of Retail CBDC on Digital Payments, and Bank Deposits: Evidence from India

53 Pages Posted: 15 Apr 2024

See all articles by Marco Di Maggio

Marco Di Maggio

Harvard Business School; National Bureau of Economic Research (NBER)

Pulak Ghosh

India Institute of Management

Soumya Ghosh

State Bank of India

Andrew Wu

Harvard Business School

Date Written: March 31, 2024

Abstract

Interest in central bank digital currencies (CBDCs) has been burgeoning with 134 countries now exploring its implementation. In December 2022, India started its CBDC pilot program to continue its transition towards a digitized payments economy. This paper presents the first empirical analysis utilizing detailed transaction data to explore the dynamics between CBDCs and existing digital payment methods, as well as the implications of increased CBDC usage on traditional bank deposits. Our findings reveal that policies which increase transaction costs for current digital payment methods catalyze a substitution effect, bolstering CBDC adoption. Furthermore, an uptick in CBDC usage is associated with a notable decline in bank, cash, and savings deposits, suggesting potential paths to bank disintermediation. This study contributes critical insights into the evolving competition between digital currencies and established financial infrastructures, highlighting the transformative potential of CBDCs on the broader economy.

Keywords: CBDC, UPI, disintermediation, digital payments

JEL Classification: E42, G21, G51, G38

Suggested Citation

Di Maggio, Marco and Ghosh, Pulak and Ghosh, Soumya and Wu, Andrew, Impact of Retail CBDC on Digital Payments, and Bank Deposits: Evidence from India (March 31, 2024). Available at SSRN: https://ssrn.com/abstract=4779520 or http://dx.doi.org/10.2139/ssrn.4779520

Marco Di Maggio

Harvard Business School ( email )

Soldiers Field
Baker Library 265
Boston, MA 02163
United States

HOME PAGE: http://https://www.hbs.edu/faculty/Pages/profile.aspx?facId=697248

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Pulak Ghosh

India Institute of Management ( email )

Bannerghatta Road
Bangalore, Karn 560076
Bangalore
India

Soumya Ghosh

State Bank of India ( email )

India

Andrew Wu (Contact Author)

Harvard Business School ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
194
Abstract Views
571
Rank
300,719
PlumX Metrics