RBI CBDC: Digital Rupee pilot starts from November 1; SBI, HDFC, 7 other banks to participate in wholesale launch (2024)

The Reserve Bank of India (RBI) will commence the pilot programme of Digital Rupee in the wholesale segment on November 1, 2022, the central bank said. The regulator has identified nine banks including 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 for the participation in the pilot

"The use case for this pilot is settlement of secondary market transactions in government securities," RBI mentioned in a notification issued on October 31, 2022

"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 central bank said.

"The first pilot in Digital Rupee - Retail segment (e₹-R) is planned for launch within a month in select locations in closed user groups comprising customers and merchants," RBI added.

Also Read: RBI CBDC: Should you opt for the e-rupee over UPI?

What is Digital Rupee?
The Central Bank Digital Currency (CBDC) can be defined as the legal tender issued by the Reserve Bank of India, according to the concept note published by the RBI on October 7, 2022. Touted as Digital Rupee The RBI has proposed to issue two versions or e-Rupee, RBI's CBDC is the same as a sovereign currency and is exchangeable one-to-one at par with the fiat currency, the regulator mentioned.

The RBI has proposed to issue two versions of Digital Rupee — general purpose or retail (CBDC-R) and wholesale (CBDC-W). Retail CBDC can be used by all including the private sector, non-financial consumers, and businesses. Wholesale CBDC is designed for restricted access to select financial institutions. While retail CBDC is an electronic version of cash primarily meant for retail transactions, the wholesale CBDC is designed for the settlement of interbank transfers and related wholesale transactions.

"Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from this pilot," the regulator said.

Explaining the difference between CBDC and money in digital form, RBI said earlier, "A CBDC would differ from existing digital money available to the public because a CBDC would be a liability of the Reserve Bank, and not of a commercial bank."

"The adoption and growth of CBDC is in the choices that the RBI makes based on the research and pilot programs. There will be significant investments in adapting or building infrastructure for CBDC, and the concept note is not keen to introduce incentives, so we can expect a few more policy dilemmas down the road. The good thing is India is not alone in this journey, nor is it lagging behind other countries- a careful, cautious and coordinated roadmap is the best way forward," said Gangesh Varma, Senior Associate, Saraf & Partners.

Digital Rupee to bolster India's digital economy: RBI
RBI believes that the digital rupee system will "bolster India’s digital economy, enhance financial inclusion, and make the monetary and payment systems more efficient." "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," the regulator said.

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