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Pilot launch of Retail Digital Rupee (e₹-R) in India

Reserve Bank of India (RBI) has announced the launch of the first pilot for retail digital Rupee (e₹-R).

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 segments are the pilot of CBDC?

The first pilot in the Digital Rupee - Wholesale segment (e₹-W) had commenced on November 01, 2022. The use case for the pilot was settlement of secondary market transactions in government securities. (Pilot launch of Central Bank Digital Currency (CBDC) in India)

RBI has now announced the launch of the first pilot for retail digital Rupee (e₹-R) on December 01, 2022.

How would pilot e₹-R work?

  • The pilot would cover select locations in closed user group (CUG) comprising participating customers and merchants. 
  • e₹-R would be distributed through intermediaries, i.e., banks. 
  • Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones / devices. 
  • Transactions can be both Person to Person (P2P) and Person to Merchant (P2M). 
  • Payments to merchants can be made using QR codes displayed at merchant locations. 

What would be the features of e₹-R?

  • The e₹-R would be in the form of a digital token that represents legal tender. 
  • The e₹-R would be issued in the same denominations that paper currency and coins are currently issued. 
  • The e₹-R would offer features of physical cash like trust, safety and settlement finality. 
  • As in the case of cash, the e₹-R will not earn any interest and can be converted to other forms of money, like deposits with banks.

What will be the objective of the pilot?

The pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real time. Different features and applications of the e₹-R token and architecture will be tested in future pilots, based on the learnings from this pilot.

Which banks will be participating in the pilot?

Eight banks have been identified for phase-wise participation in this pilot. The first phase will begin with four banks, viz., State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank in four cities across the country. Four more banks, viz., Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will join this pilot subsequently. 

Which cities will be covered in the pilot?

The pilot would initially cover four cities, viz., Mumbai, New Delhi, Bengaluru and Bhubaneswar and later extend to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. 


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

Reserve Bank of India. (2022, November 29). 'Operationalisation of Central Bank Digital Currency – Retail (e₹-R) Pilot'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54773


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