The Reserve Bank of India (RBI) on Tuesday announced a pilot for retail central bank digital currency (CBDC) on 1 December. The digital rupee would be in the form of a digital token that represents legal tender, the RBI said.
Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones. Transactions can be both Person to Person (P2P) and Person to Merchant (P2M), the central bank said.
The retail pilot project, which will cover select locations in closed user groups, will be in the form of a digital token that represents legal tender, the RBI said. RBI has also selected eight banks for phase-wise participation in this pilot. The first phase will begin with four banks – State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank in four cities. Later, Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will join this pilot.
The pilot will initially be rolled out in Mumbai, New Delhi, Bengaluru and Bhubaneswar. It will be extended to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. The scope of the pilot may be expanded gradually to include more banks, users and locations as needed, the RBI said.
According to data provided by the Clearing Corporation of India Ltd (CCIL), the CBDC bond trades in the first week averaged at Rs 287.5 crore on a daily basis. In the following week, the bond trades using the CBDC climbed to about Rs 500 crore. Since then, however, the volumes have tapered off, with trades averaging around Rs 220 crore over the last couple of days, CCIL data showed.
The pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real time. Different features and applications of the digital rupee token and architecture will be tested in future pilots, based on the learnings from this pilot. RBI Governor Shaktikanta Das had earlier this month said that the RBI will follow up on the wholesale e-rupee pilot with a similar trial on the retail side this month itself.
Jaya Vaidhyanathan, CEO, BCT Digital said, “Since it provides a regulated alternative to cryptocurrencies in the market, the CBDC would lead to more robust and reliable payments, lowering the dependency on cash. The underpinning technology would make transaction costs low. Being interoperable with other payment systems, it will complement existing techniques like UPI, thus completing the mobile payments ecosystem.”