The Press Information Bureau released a press release dated 12th December, 2022 on the Reserve Bank of India’s (RBI) concept note on Central Bank Digital Currency (CBDC). It may be recalled that the RBI had issued the note on October 7, 2022. The Note is accessible at RBI’s website.
RBI has launched pilots of CBDC in both Wholesale and Retail segments. The pilot in wholesale segment, known as the Digital Rupee -Wholesale (e₹-W), was launched on November 1, 2022 with use case being limited to the settlement of secondary market transactions in government securities.
The use of (e₹-W), is expected to make the inter-bank market more efficient. Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk.
The pilot in retail segment, known as digital Rupee-Retail (e₹-R), was launched on December 01, 2022. It was launched within a closed user group (CUG) comprising of participating customers and merchants. This pilot segment has components based on blockchain technology.
The RBI has identified eight banks for phase-wise participation in the retail pilot project.
The first phase includes four banks, namely:
- the State Bank of India,
- the Bank of Baroda,
- the Yes Bank and
- the IDFC First Bank.
Subsequently, another four banks will participate in the retail pilot. These are:
- the Bank of Baroda,
- the Union Bank of India,
- the HDFC Bank and
- the Kotak Mahindra
Pertinently, RBI has already rolled out a pilot in the retail version of the CBDC (e₹-R), on December 01, 2022. The e₹-R is in the form of a digital token that represents legal tender. It is being issued in the same denominations as the paper currency and coins. It is being distributed through financial intermediaries, i.e., the banks. Users will be able to transact with e₹- R through a digital wallet offered by the participating banks. Transactions can be both; Person to Person (P2P) and Person to Merchant (P2M). The e₹-R offers features of physical cash like trust, safety and settlement finality. Like cash, the CBDC will not earn any interest and can be converted to other forms of money, like deposits with banks.
RBI will expand the scope of the pilots gradually to include more banks, users and locations based on feedback received during the pilots