RBI to launch first pilot of Digital Rupee on Tues; identifies 9 banks for rollout
Nine banks have been identified by the Reserve Bank of India (RBI) to participate in beginning the first pilot of digital rupee in the wholesale segment. The nine banks are State Bank of India (SBI), Bank of Baroda (BoB), Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC, the RBI said in a release.
The pilot will commence on Tuesday, November 1.
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For more efficient banking
According to the release on Monday, the use case for the wholesale pilot is settlement of secondary market transactions in government securities. This is expected to make the inter-bank market more efficient, the RBI said.
According to the central bank, settlement in central bank money would reduce transaction costs as settlement guarantee infrastructure or collateral to mitigate settlement risk will not be needed. Based on this pilot, pilots on other wholesale transactions and cross-border payments could be taken up.
India’s CBDC
The RBI is planning to launch the first pilot in digital rupee-retail segment within a month in select locations in closed user groups.
Central bank digital currency, or CBDC, is a currency that is backed by the regulator and stored in a digital format. It can be converted into paper currency and will reflect on the RBI’s balance sheet, thereby granting it legal tender status. India’s CBDC will be called ‘e₹’, reports Moneycontrol.
FM’s announcement
The launch of ‘e₹’ was announced by finance minister Nirmala Sitharaman on February 1. She had said that the introduction of CBDC – which is not a crypto currency — will boost the digital economy and it will be based on the blockchain technology.
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An RBI report had earlier described CBDC as something that will provide a safe, robust, and convenient alternative to physical cash. Depending on various design choices, it can also assume the complex form of a financial instrument, the RBI report had said.
