RBI picks 8 banks, and 13 cities to test retail digital currency
The Reserve Bank of India (RBI) will launch the first pilot for retail digital rupee (e₹-R) in Mumbai, New Delhi, Bengaluru, and Bhubaneswar on December 1. Later expand it to nine more cities in the initial phase, said RBI officials. This follows a month after the RBI started a pilot in the digital rupee-wholesale segment on November 1. The first phase of the retail digital rupee will begin with four banks — State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank in four cities across the country, said RBI in a statement issued on Tuesday.
“The e₹-R would be in the form of a digital token representing legal tender. It would be issued in the same denominations that paper currency and coins are currently issued,” the RBI said while announcing the operationalization of the Central Bank Digital Currency – Retail (e₹-R) Pilot from December 1.
CBDC is a digital form of currency notes issued by a central bank. While most central banks across the globe are exploring the issuance of CBDC, the key motivations for its issuance are specific to each country’s unique requirements. The digital rupee would be distributed through intermediaries (banks).
RBI said users will be able to transact with eRupee through a digital wallet offered by the participating banks and stored on mobile phones/ devices.
Transactions can be both Person to Person (P2P) and Person to Merchant (P2M). Payments to merchants can be made using QR codes displayed at merchant locations. The eRupee would offer features of physical cash like trust, safety, and settlement finality. “As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks,” the central bank said.
The pilot, it said, will test the robustness of the entire process of digital rupee creation, distribution, and retail usage in real time. Different features and applications of the eRupee token and architecture will be tested in future pilots, based on the learnings from this pilot. The RBI further said the pilot would cover select locations in closed user groups (CUG) comprising participating customers and merchants.
Eight banks have been identified for phase-wise participation in the pilot. After State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank, four more banks — Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank — will join the pilot subsequently. The other nine cities to which the pilot will be later extended are: Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.
The scope of the pilot may be expanded gradually to include more banks, users, and locations as needed, the Reserve Bank added. Last month, the RBI said digital rupee – wholesale will help in reducing transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk.
The Government of India announced the launch of the digital rupee from the fiscal year 2022-23 onwards in the Union Budget tabled in Parliament on February 1, 2022. In a recent concept note on Central Bank Digital Currency, the RBI said CBDC is aimed to complement, rather than replace, current forms of money and is envisaged to provide an additional payment avenue to users, not to replace the existing payment systems.
Across the globe, more than 60 central banks have expressed interest in CBDCs with a few implementations already under pilot across both retail and wholesale categories, and many others are researching, testing, and/ or launching their own CBDC framework.
[with PTI inputs]
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