Vol. 7, Issue 2, Part L (2025)

The advent of Central Bank Digital Currencies (CBDCs) represents a transformative step in the monetary system of emerging economies like India. The Reserve Bank of India (RBI) has initiated pilots for the digital rupee to modernize payment systems, improve financial inclusion, and enhance monetary policy efficiency. This paper examines the potential implications of CBDC adoption on India’s monetary aggregates (M1, M2, M3), commercial bank credit creation, and the effectiveness of monetary policy transmission. Using simulation modelling, comparative analysis of global CBDC experiences, and empirical assessment, the study provides policy-relevant insights into how digital currency can reshape liquidity management, banking operations, and financial stability.