RBI will launch the e-Rupee pilot in December
- ByStartupStory | November 29, 2022
A month after testing the wholesale central bank digital currency, the Reserve Bank of India (RBI) on Tuesday announced the beginning of a pilot programme for the retail digital rupee (e-R) on December 1 with four banks in four cities.
According to a press release from RBI, the pilot would focus on a few locations within a closed user group (CUG), which would include participating patrons and business owners. State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank will be the first four banks to participate in the pilot, out of the eight that have been identified for gradual participation. Later on, the pilot will include the following four banks: Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank. Mumbai, New Delhi, Bengaluru, and Bhubaneswar will be the initial cities covered by the retail CBDC; however, Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla would also be included subsequently.
“The e-R would take the shape of a digital token that stands in for money. The statement stated that it would be distributed in the same denominations that coins and paper money are currently distributed in. Payments made using CBDC would be final and not require interbank settlement, giving it an advantage over current digital payment systems. Users will be able to utilise e-R distributed by banks to conduct transactions through a digital wallet provided by participating institutions and kept on mobile devices. Both person-to-person and person-to-merchant transactions using digital rupees are permitted, according to the RBI. Quick response (QR) codes that are displayed at merchant sites can be used to pay for goods and services, according to the statement.
“The e-R would give characteristics of actual money, such as trust, safety, and finality of settlement. It will not accrue interest, just like cash, and can be changed into other forms of payment like bank deposits, according to the RBI.
According to RBI, the pilot will assess the stability of the entire creation, distribution, and retail use of digital rupees in real-time. Based on the results of this pilot, additional features and applications of the retail digital rupee token and architecture will be evaluated in subsequent pilots. According to the statement, “the pilot’s scope may be gradually expanded to include additional banks, users, and locations as required.”
Given that domestic payment systems are largely real-time and have possibly the lowest transaction costs in the world, RBI deputy governor T. Rabi Sankar spoke extensively about the relevance of CBDC in the Indian context last July. In fact, a pilot study by RBI on people’s retail payment preferences in six cities between December 2018 and January 2019 revealed that cash remained the most popular way to send and receive money for everyday expenses. Cash is mainly used for transactions with low value, up to $500.
According to Sankar, the preference for cash represents a hindrance to digital payment methods, and CBDC is unlikely to replace this use of cash. But as long as anonymity is guaranteed, he had said, preference for cash for its anonymity, for example, can be switched to CBDC acceptance.
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