In four cities, the Reserve Bank (RBI) has launched retail digital rupees

Photo of author

By Suraj Bediya

The first retail digital rupee pilot project was introduced by the Reserve Bank of India (RBI) on Thursday in Mumbai, New Delhi, Bengaluru, and Bhubaneswar. Four banks State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank as well as customers and business owners have joined the retail digital rupee project, which has been running in a closed user group.

The Reserve Bank of India (RBI) began a pilot program for the digital rupee on November 1 and it was launched a month later on December 1.

There will be nine more cities and four more banks added to the retail digital rupee project’s second phase.

In launching the trial project on November 29, the central bank stated, “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.”

According to the RBI, “The e₹-R is in the form of a digital token that represents legal tender and would offer “features of physical cash like trust, safety, and settlement finality.”

The introduction of the digital rupee is also anticipated to improve financial inclusion in the economy and lower operational expenses associated with managing real money. In a release on Thursday, Yes Bank said it rolled out the RBI’s CBDC (Central Bank Digital Currency) for its closed user group, comprising its retail customers and merchants. During the pilot phase, access to the Yes Bank Digital Rupee app will be given to the bank’s select retail customers who will be part of the closed user group, it was said.

CBDC is a central bank-issued digital version of currency notes. Even while the majority of central banks worldwide are considering issuing CBDC, the main drivers behind such an action depend on the particular needs of each nation.

The RBI will use cutting-edge technology to manufacture digital rupees based on the demands made by banks, which will then be issued to the banks digitally and safely.

Customers will be able to request digital rupees through the mobile apps that the banks have offered for them, and the requested amount will be credited to those wallets.

Both person-to-person (P2P) and person-to-merchant (P2M) transactions are possible. QR codes that are displayed at retail places can be used to make payments to retailers. Through a digital wallet provided by the participating banks and kept on mobile phones/devices, customers will be able to conduct transactions with e₹-R.

For phase-by-phase involvement in the pilot project, eight banks have been identified. Four additional banks—Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank—will join the trial initiative after State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. The pilot program will eventually be expanded to nine additional cities: Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.

According to the RBI, the scope of the pilot project may be expanded gradually to include more banks, users and locations as needed.

The RBI stated last month that the wholesale digital rupee will help to lower transaction costs by obviating the requirement for settlement guarantee infrastructure or for collateral to reduce settlement risk.

In the Union Budget that was presented to Parliament on February 1, 2022, the central government declared that the digital rupee would be introduced beginning with the fiscal year 2022–23.

In a recent concept note, the RBI stated that CBDC is intended to supplement existing payment systems rather than replace them. It is also intended to give users another payment option.

More than 60 central banks from around the world have expressed interest in CBDCs. A few implementations in the retail and wholesale sectors are currently undergoing testing, and many more are developing, testing, or launching their own CBDC frameworks.