Reserve Bank of India to test launch ‘Digital Rupee’ for specific use cases


The Reserve Bank of India (RBI) said on Monday that pilot launches of the digital rupee for specified use cases will begin soon. As a result, the first digital rupee pilot for the wholesale industry will begin on November 1, 2022.

The use case for this pilot, according to the RBI press release, is the settlement of secondary market transactions in government securities. “Use in the wholesale segment is expected to make the inter-bank market more efficient,” the RBI stated.

The central bank claims that settling in central bank money will lower transaction costs by eliminating the requirement for settlement guarantee infrastructure or collateral to offset settlement risk.

Jaya Vaidhyanathan, CEO, BCT Digital, said, “The rollout of the Central Bank Digital Currency (CBDC), has been one of the most sought-after developments, since its announcement in the FY23 Union budget.”

“RBI’s commencement of the pilot of the digital rupee marks appreciable progress in the journey toward digital payments. While experts were wondering when India –the world’s 5th largest economy – would start in this regard, RBI as usual has not disappointed. The initiative has started in the low volume, a high-value wholesale (interbank) segment from where learnings would be used to roll out reliable, built-to-scale retail payments.”

“The pilot announcement involves nine banks, including SBI, Bank of Baroda, HDFC Bank, Yes Bank, Kotak Mahindra Bank, and ICICI Bank, settling secondary market transactions in government securities, thereby reducing settlement risk and transaction costs.”

“A successful pilot and by extension, a full rollout of the digital rupee is expected to boost the reach of payment and financial needs of a wider category of users while ensuring transparency and low operational cost, and in this regard, it is encouraging to witness RBI’s support for innovation in creating a world-class, future-ready digital ecosystem.”

Future pilots will concentrate on other wholesale transactions and cross-border payments. The lessons learned from this pilot will be used in future pilots.

The RBI said that nine banks, “the State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC”, have been identified for participation in the pilot.”

“The first pilot in the digital rupee – retail segment (e ₹-R) is planned for launch within a month in select locations in closed user groups comprising customers and merchants. The details regarding operationalisation of e ₹ – R pilot shall be communicated in due course,” the central bank said.

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