Retail CBDC Launched By RBI – Following the successful launch of the wholesale pilot project for central bank digital currency by the RBI on November 2022, the retail CBDC (Central Bank Digital Currency) pilot project was initiated by the Reserve Bank of India on December 1st 2022.
RBI’s Retail CBDC Pilot Project 2022 Overview
The retail e-Rupee pilot project launched on December 1st. There are four cities across India that are part of the pilot program at the moment – New Delhi, Mumbai, Bhubaneswar and Bengaluru, where customers and merchants in these cities can use the digital rupee, or e-Rupee, for a variety of transactions. And these Four top-rated banks of India are mainly controlling the launch of the retail e-Rupee at the moment, and these banks are – SBI, IDFC First Bank, ICICI Bank and Yes Bank.
It is planned to expand the service to other cities such as Ahmedabad, Guwahati, Gangtok, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla shortly. As part of the pilot launch in these cities, four more banks will be involved – Union Bank of India, Kotak Mahindra, Bank Bank of Baroda, and HDFC Bank – These big banking players will play a vital role in the pilot project.
Throughout the duration of the pilot project, the scope will be gradually expanded in order to include a greater number of banks, users and locations as required for future endeavours.
Types of e-Rupee (e-₹)
In order to categorize the digital rupee, it is necessary to take into consideration its usage and functions as well as the differences in accessibility that characterize the digital rupee. These are grouped into two broad categories:
What is a Wholesale e-Rupee?
The Wholesale e-Rupee is a digital currency created by RBI to settle transactions in the secondary market to improve the security, efficiency, and cost-effectiveness of financial transactions for government securities in the wholesale segment.
The Wholesale Central Bank Digital Currency (CBDC) can be used by only a select group of financial institutions. In order to improve the security, efficiency, and cost-effectiveness of financial transactions in the government securities segment, interbank market, and capital market, it was launched.
What is a Retail e-Rupee?
The Retail e-Rupee is a general-purpose electronic version of our National Currency, Rupee ₹, which can mainly be used by businesses and individuals for retail transactions and can also be used by private entities, companies, non-financial firms and customers. Therefore, as a digital token, it will represent legal tender.
As with the physical rupee, the e-Rupee cannot earn any interest, unlike the physical money that could earn an interest, the only difference being that the e-Rupee can be converted into deposits in banks that can earn interest. The e-Rupee will be based on the same denominators as real currency and distributed via banks.
The Participating bank will provide its customers with a Digital Wallet, which will allow its users to transact using retail e-Rupee. Various devices and mobile phones can store the e-Rupee via a digital wallet. Person-to-person and merchant-to-person transactions are both possible with the e-Rupee via these digital wallets. Just Like UPI, customers can simply scan the QR codes displayed at various stores and merchant locations, which then can be used to transfer the e-Rupee via these digital wallet apps to the merchants.