The Reserve Bank of India (RBI) has announced the launch of the first pilot for a central bank digital currency (CBDC) on December 1, 2022.
Retail digital rupee is also known as (e₹-R).
RBI has designated eight banks for phase-wise participation in this pilot. The first phase will start with four banks namely State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank in four cities across the country. Four more banks, Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will join this pilot later.
“The pilot will initially cover four cities, Mumbai, New Delhi, Bengaluru and Bhubaneswar and later extend to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. The pilot area may be expanded gradually to to cover more banks, users and locations as required,” RBI said in a press release.
According to the RBI, the pilot will include selected locations in the closed user group (CUG) consisting of participating customers and merchants. The E₹-R will be in the form of a digital token representing legal tender.
“It will be issued in the same denominations in which banknotes and coins are currently issued. It will be distributed through intermediaries, namely banks. Users will be able to use the e₹-R through a digital interface operated by participating banks. provided and transact 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. are shown to be done,” RBI said.
The RBI further stated that India’s retail CBDC will offer features of physical money such as reliability, security and settlement finality. As in the case of cash, it will not earn any interest and can be converted into other forms of money, such as deposits in banks.
Earlier, on October 31, 2022, the RBI announced the first pilot in the CBDC project through retail segment (e₹-W).
Nine banks, namely 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 project.
In contrast to retail CBDC, retail CBDC can be defined as any currency issued to the general public. It is based on distributed ledger technology – commonly known as DLT – and has the features of anonymity, traceability, and is available 24 x 7 and 365 days a year, with the possibility of applying an interest rate.