RBI Commences 1st Pilot of Digital Rupee e₹

The Reserve Bank of India (RBI) today launches the digital rupee – e₹ – for the wholesale segment as part of its first pilot test programme to review and improve the currency’s functionality.

"The first pilot in the Digital Rupee - Wholesale segment (e₹-W) shall commence on November 1, 2022", said the press release by the RBI.

This first pilot in Digital Rupee - Retail segment (e₹-W) is in select locations in closed user groups comprising customers and merchants. The details regarding operationalisation of e₹-W pilot shall be communicated by the RBI in due course.

Nine banks — 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.

The use case for this pilot is settlement of secondary market transactions in government securities.

Use of e₹-W is expected to make the inter-bank market more efficient. Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk. Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from this pilot.

In early last month, RBI issued a concept note on central bank digital currency (CBDC), listing the risks and benefits of introducing these currencies.

CBDC is legal tender issued in digital form. It is the same as fiat currency and is exchangeable one-to-one with government-issued money.

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