The Reserve Bank of India is all set to launch Digital Rupee(e₹-R), India’s first pilot for retail central bank digital currency on December 1, 2022. The e-Rupee, the country’s first official cryptocurrency is a digital token representing legal tender. RBI has partnered with eight banks for the phase-wise roll-out of this pilot.
Initially, four banks including the State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank will facilitate the launch in Mumbai, New Delhi, Bengaluru, and Bhubaneswar. The digital tokens will be in the same denominations as paper currency and can be used to make and receive payments. Later, the Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank will join this pilot issue Digital Rupee in Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.
The digital rupee will be distributed through intermediaries, meaning banks. Users will be able to transact the e-rupee through a digital wallet offered by the participating banks and stored on smartphones. The transactions can be both person-to-person and person-to-merchant, using QR codes displayed at merchant locations.
The RBI had said earlier in a statement, “CBDC is the legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different.” The retail e-rupee will be an electronic version of cash. It will provide access to safe money for payment and settlement, as it will be the direct liability of the central bank. “The e-Rupee would offer features of physical cash like trust, safety and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks,” the official RBI statement added.
On November 1, the central bank introduced the digital rupee for the wholesale segment to settle secondary market transactions in government securities. Wholesale CBDC is available for restricted access to select financial institutions. It has the potential to transform the settlement systems for financial transactions undertaken by banks in the government securities (G-Sec) segment, inter-bank market, and capital market more efficiently and securely in terms of operational costs, use of collateral, and liquidity management.