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Pilot launch of Central Bank Digital Currency (CBDC) in India

Reserve Bank of India (RBI) has launched the Central Bank Digital Currency (CBDC) in India on a pilot basis.

What is Central Bank Digital Currency (CBDC)?

Reserve Bank of India (RBI) broadly defines Central Bank Digital Currency (CBDC) as the legal tender issued by a central bank in a digital form. 

What is the basis of pilot launch of CBDC in India?

RBI had released a ‘Concept Note on Central Bank Digital Currency for India’ on October 07, 2022 and had announced to soon commence pilot launches of Digital Rupee (e₹) for specific use cases. (Highlights of Concept Note on Central Bank Digital Currency)

When and in which segment is the first pilot of CBDC?

  • The first pilot is in the Digital Rupee - Wholesale segment (e₹-W).
  • The pilot commenced on November 01, 2022.
  • The use case for the pilot is settlement of secondary market transactions in government securities. 

What are the expected benefits of the pilot?

  • 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. 

Which banks are participating in the pilot?

Nine banks, viz., 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.

Which segments will be covered in future pilots?

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. 

Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from first pilot in the Digital Rupee - Wholesale segment (e₹-W).


References

Reserve Bank of India. (2022, October 07). 'Concept Note on Central Bank Digital Currency'. Retrieved from https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/CONCEPTNOTEACB531172E0B4DFC9A6E506C2C24FFB6.PDF

Reserve Bank of India. (2022, October 07). 'Issuance of Concept Note on Central Bank Digital Currency'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54510

Reserve Bank of India. (2022, October 31). 'Operationalisation of Central Bank Digital Currency-Wholesale (e₹-W) Pilot'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54616


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Comments

  1. AnonymousNovember 12, 2022 at 7:36 PM

    How is digital currency different from rupee used digitally that is UPI/net banking etc?

    ReplyDelete
    Replies
    1. Inquisitive MindNovember 13, 2022 at 12:09 PM

      The rupee used digitally thorough UPI / net banking is backed by your bank deposits and requires a settlement system for the transaction to get through. Whereas the digital rupee is an alternative to the money in your wallet and may be used without the involvement of any bank or settlement system.

      Delete

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