Finance minister urges digital rupee expansion as global pressures test RBI’s defence of the currency

India’s Finance Minister Nirmala Sitharaman has urged the central bank to speed up its digital rupee pilots, even as the Reserve Bank of India faces a growing struggle to defend the physical currency against rising US bond yields and a global oil rally.## The digital push vs macroeconomic pressureSpeaking at the Global Fintech Fest 2026 in Mumbai, Sitharaman pressed the RBI to "continue to sharpen its capabilities" by advancing both the wholesale and retail versions of its central bank digital currency (CBDC). The push comes at a complicated moment for the central bank. While it is being asked to pioneer the future of digital finance, its immediate resources are being stretched to protect the rupee from external economic shocks.High global oil prices and climbing US Treasury yields have begun chipping away at the RBI's ability to support the domestic currency. Market analysts, including Neelkanth Mishra, have warned that if global crude prices climb toward $100 a barrel, the central bank may be forced to make a hard call on how much pressure the rupee can take before letting it slide further.## Instant settlement and tokenised bondsYet in Mumbai, the official focus remained squarely on long-term financial modernisation. Sitharaman highlighted a recent pilot by REC Ltd under the Securities and Exchange Board of India's regulatory sandbox, where a tokenised corporate bond was settled near-instantly using the digital rupee. She said that in this entire framework, the monetary settlement was possible due to the presence of CBDC, calling tokenisation a defining development for financial systems.## Regulating AI with a soft touchThe finance minister also addressed the rapid rise of artificial intelligence, describing it as a "double-edged sword" that helps detect fraud but also allows criminals to automate highly sophisticated cyber-attacks. She urged regulators to adopt a "soft-touch" approach to AI to avoid killing off innovation, while warning about the systemic risks of "agentic AI" — systems that can act autonomously and potentially spread market shocks at machine speed."AI may assist judgment, but responsibility must remain human and institutional," Sitharaman said. She argued that company boards, senior management, and regulators must understand exactly where AI is being used rather than leaving it solely to IT departments.## Self-regulation and demographic dividendsFor financial technology firms operating outside the usual regulatory boundaries, Sitharaman advocated self-regulation, saying that where the regulator's writ ends, their own standards must begin. She proposed a federated industry platform to help Indian technology companies deal with increasingly fragmented global regulations and speak with a collective voice abroad.Sitharaman also dismissed pessimistic views of India’s young demographic profile, mockingly comparing chronic detractors to "naraz fufajis" (grumpy uncles). Young Indians, she said, are turning the country's median age into a competitive advantage by building and scaling businesses ahead of India's centenary of independence in 2047.