RBI launches pilot for the Digital Rupee. These nine banks are included!

9 Banks will participate in RBIs Digital Rupee pilot launch

RBIs Digital Rupee pilot launch

According to the Reserve Bank of India (RBI), nine banks, including HSBC, IDFC First Bank, YES Bank, Kotak Mahindra Bank, ICICI Bank, HDFC Bank, Union Bank of India, Bank of Baroda, and State Bank of India, have been chosen to participate in Digital Rupee pilot launch's wholesale segment. RBI will start the Digital Rupee pilot program of the wholesale segment on November 1, 2022. RBI issued a notification on October 31, 2022, and mentioned that the reason behind this pilot is the settlement of government securities transactions in the secondary market. It added that using the Digital Rupee-wholesale would make the interbank market efficient. Central bank money settlement would lessen the costs of transactions. RBI said the Retail segment pilot of the Digital Rupee would launch in under a month in selected areas. It would apply to specific merchants and customers.

Read: What does the RBI say about the digital rupee?

What Is the e-Rupee or Digital Rupee?

Digital Rupee/e-Rupee/ CBDC (Central Bank Digital Currency) will be a legal tender that the RBI will issue. The RBI published a concept note on October 7 explaining this. RBI wants to issue two versions of the digital rupee. The CBDC will be the same as sovereign currency and exchangeable. Users can use it for one-to-one transactions at par with fiat currency. 

The two versions will be retail (general purpose) and wholesale. The CBDC-R can be used after including businesses, non-financial consumers, and the private sector. On the other hand, CBDC-W will be designed to select financial institutions. The Retail segment will be an electronic version of money (cash) which will primarily be used for retail transactions. The Wholesale segment will be designed for interbank transfer settlements and related transactions in wholesale. 

RBI said the focus of the pilots in the future would be cross-border payments after learning from this pilot. RBI explained the difference between money in digital form and CBDC. It said it would be different from the digital money that currently exists as the CBDC would be the Reserve Bank's liability and not of commercial banks. The growth and adoption of CBDC would be in the RBI's choices based on pilot programs and research. It will make significant investments to build infra or adapt to the CBDC. There might be some policy issues in the future as the concept note needs to show incentives. An expert said India is not lagging compared to others, nor is it alone in the journey. 

Read: All you need to know about the Central Bank Digital Currency (CBDC)  

The RBI believes the digital rupee will make payment and monetary systems efficient, increase financial inclusion, and bolster our economy. It would not replace but will complement the current money forms and provide an additional payment method. 

First pilot of the digital rupee 

According to the Reserve Bank of India (RBI), nine banks, including HSBC, IDFC First Bank, YES Bank, Kotak Mahindra Bank, ICICI Bank, HDFC Bank, Union Bank of India, Bank of Baroda, and State Bank of India, have been chosen to participate in Digital Rupee pilot launch's wholesale segment. RBI will start the Digital Rupee pilot program of the wholesale segment on November 1, 2022. RBI issued a notification on October 31, 2022, and mentioned that the reason behind this pilot is the settlement of government securities transactions in the secondary market. It added that using the Digital Rupee-wholesale would make the interbank market efficient. Central bank money settlement would lessen the costs of transactions. RBI said the Retail segment pilot of the Digital Rupee would launch in under a month in selected areas. It would apply to specific merchants and customers.

Read: What does the RBI say about the digital rupee?

What Is the e-Rupee or Digital Rupee?

Digital Rupee/e-Rupee/ CBDC (Central Bank Digital Currency) will be a legal tender that the RBI will issue. The RBI published a concept note on October 7 explaining this. RBI wants to issue two versions of the digital rupee. The CBDC will be the same as sovereign currency and exchangeable. Users can use it for one-to-one transactions at par with fiat currency. 

The two versions will be retail (general purpose) and wholesale. The CBDC-R can be used after including businesses, non-financial consumers, and the private sector. On the other hand, CBDC-W will be designed to select financial institutions. The Retail segment will be an electronic version of money (cash) which will primarily be used for retail transactions. The Wholesale segment will be designed for interbank transfer settlements and related transactions in wholesale. 

RBI said the focus of the pilots in the future would be cross-border payments after learning from this pilot. RBI explained the difference between money in digital form and CBDC. It said it would be different from the digital money that currently exists as the CBDC would be the Reserve Bank's liability and not of commercial banks. The growth and adoption of CBDC would be in the RBI's choices based on pilot programs and research. It will make significant investments to build infra or adapt to the CBDC. There might be some policy issues in the future as the concept note needs to show incentives. An expert said India is not lagging compared to others, nor is it alone in the journey. 

Read: All you need to know about the Central Bank Digital Currency (CBDC)  

The RBI believes the digital rupee will make payment and monetary systems efficient, increase financial inclusion, and bolster our economy. It would not replace but will complement the current money forms and provide an additional payment method. 

First pilot of the digital rupee 

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