RBI to Test CBDC With Its Own Officials

The Reserve Bank of India (RBI) is planning to test its Central Bank Digital Currency (CBDC) by crediting a portion of allowances to the digital wallets of its officers reports Economic Times citing an internal communique to senior officials of the central bank.

The RBI internal communique dated December 27, said, “As a part of scaling up of CBDC retail pilot and to encourage the use of CBDC wallet by the officers of the bank (RBI), it has been decided to credit the reimbursement amount towards internet/data charges to the CBDC wallets of officers…”

A user manual for updating the CBDC wallets has been circulated. The testing phase involves various aspects such as security, transaction speed, and user experience to ensure a smooth rollout.

This move is part of a broader effort to explore the potential of CBDCs and understand how they can be integrated into the existing financial system.

The Reserve Bank of India (RBI) has been actively exploring the concept of a Central Bank Digital Currency (CBDC). Recently, there have been reports about RBI officials conducting tests to understand the potential impact and functionality of a CBDC in the Indian financial system.

These tests are part of a broader initiative to evaluate how a digital currency issued by the central bank could be integrated into the existing monetary framework. The RBI is considering various aspects, including the technological infrastructure, security measures, and the potential economic implications of introducing a CBDC.

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.

Finance Minister Introduces Blockchain-based 'Digital Rupee' To Launch in 2022-23

RBI to introduce Digital Rupee using Blockchain and other technologies starting 2022-23

This will lead to more efficient and cheaper currency management system.

It will also give boost to digital economy

The Finance Minister of India, Smt Nirmala Sitharaman, today announced the introduction of Digital Rupee to be issued by the Reserve Bank of India starting 2022-23.

Presenting the Union Budget 2022-23 in the Parliament here today, the Finance Minister said that the Central Bank Digital Currency (CBDC) will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system, the Minister stated. The Digital Currency will use blockchain and other technologies.

Smt Nirmala Sitharaman said that in recent years, digital banking, digital payments and fintech innovations have grown at a rapid pace in the country. Government is continuously encouraging these sectors to ensure that the benefits of digital banking reach every nook and corner of the country in a consumer-friendly manner.

Taking forward this agenda, and to mark 75 years of our independence, the Finance Minister announced that it is proposed to set up 75 Digital Banking Units (DBUs) in 75 districts of the country by Scheduled Commercial Banks.

In addition, the FM also announced bringing post-offices to core-banking system which will enable financial inclusion by converting the existing post-office saving accounts into - "Anytime- Anywhere Post Office Savings"

The Finance Minister said that in 2022, 100% of 1.5 lakh post offices will come on the core banking system enabling financial inclusion and access to accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts. This will be helpful, especially for farmers and senior citizens in rural areas, enabling interoperability and financial inclusion.

The Finance Minister assured that the financial support for digital payment ecosystem announced in the previous Budget will continue in 2022-23. This will encourage further adoption of digital payments. There will also be a focus to promote use of payment platforms that are economical and user friendly, she said.