Central Bank Digital Currency: India’s central bank’s digital currency is making its debut in the world of real-time trading | Rare Techy
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State Bank of India (SBI), Bank of Baroda, ICICI Bank and IDFC Bank are among the nine participating lenders said to have cut initial CBDC deals to settle trades in g-secs, three people familiar with the matter said. sources told ET. . Nine lenders, including HDFC Bank, HSBC and Kotak Mahindra and Yes Bank, have participated in the central bank’s pilot project that was launched on Tuesday. It is said that each bank had at least four or five transactions.
The individual banks could not immediately be reached for comment.
“The pilot project has received encouraging responses from the participants,” said Sushanta Mohanty, general manager, Bank of Baroda. “We participated with the initial agreement. This digital currency should be more accessible.”
Each participating bank has a digital currency account, known as a CBDC Account, maintained with the Reserve Bank of India (RBI). Banks have to first transfer from their existing accounts to this account.
If bank X buys loans from bank Y, X’s CBDC account will be segregated with a corresponding loan in the same bank Y account.
Unlike the current settlement process where banks settle trades on a network basis on a special platform known as NDS-OM, the CBDC pilot project requires each trade to be settled, calculated on a ‘bucket basis’.
The digital settlement will occur within the trading day – that’s T+0 – as opposed to T+1 in government public securities trading.
Currently, the balance in the CBDC for a bank will be transferred back to its current account.
“RBI may expand the use cases for CBDC in other retail transactions if the pilot project is successful,” said a trader from a participating bank.
Referral and institution-to-institution payments may be some potential future uses.
Currently, the cryptographic technology is being used for pilot projects, which will be developed over a period of time, the sources said. Cryptography is a form of secure communication.
“Blockchain could well play an important role in CBDC, reducing the chances of fraud,” said Ram Rastogi, president, Fintech Consumers Association (FACE). sect when it begins.”
A retail pilot project with CBDC is expected to be launched at a later stage.
The real danger in CBDCs, according to Rastogi, is that there is no limit to the level of control the government can exert over people if the money is fully electronic and provided directly by the government.
All nine such banks are generally in touch with the RBI to understand any technical glitch that may appear. CBDC accounting process, transaction flexibility, accurate debit/credit entries are considered as the key to the success of digital currency through this pilot project.
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