Benefits of e-rupee rupee include reduced transaction costs and better control of the government over monetary transactions in the country.
The Reserve Bank of India said on Wednesday that the central bank digital currency, or e-rupee, for retail customers will soon be piloted by five banks in nine more cities. However, the name of participating banks and cities is still unclear.
E-rupee for retail is currently available for only 50,000 users, out of them 5,000 are merchants. The service is offered by participating banks on an invitation basis across five cities, RBI deputy governor T Rabi Shankar told PTI.
“Having said on this and the risk of being right, let me just reiterate that we want the process to happen. But we want the process to happen gradually and slowly. We are in no hurry to make something happen very quickly,” he added.
A Central Bank Digital Currency, or CBDC, is a digital form of currency issued by a central bank that could be used in contactless transactions. CBDC is bifurcated into two segments: retail (CBDC-R), which is available for all, and wholesale (CBDC-W), which is designed for select financial institutions.
Talking about the e-rupee for the retail segment, the central bank launched the first pilot for retail central bank digital currency in December last year. Initially, four banks including the State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank facilitated the launch, and Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank also joined later.
The RBI commenced India’s first digital rupee pilot project for the wholesale segment in November last year. Nine banks which include 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 digital rupee pilot project.
It is noteworthy that e-currency in India comes amid the RBI’s staunch opposition to cryptocurrencies. While cryptocurrencies use digitalized assets based on blockchain technology and operate without a financial intermediary like banks etc., digital currency is backed by the government and is a legal tender issued by the country’s central bank.
Some benefits of a digital rupee include reduced transaction costs and better control of the government over monetary transactions in the country. And since it is in electronic form, physical damage or loss is also not possible.