E-rupee to be launched in Mumbai, 3 other cities for pilot from Thursday

The Reserve Bank of India today said the first pilot for retail digital rupee will start Thursday with the pilot initially covering Mumbai, New Delhi, Bengaluru and Bhubaneswar in closed user groups, comprising customers as well as merchants.

Testing efficiency for the real world

"The pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real time," the RBI said in a release today. The central bank also said that different features and applications of the retail digital rupee token and architecture will be tested in future pilots, based on the learnings from this pilot.

Private and public sector banks brought together

Eight banks have been identified for phase-wise participation. The first phase will begin with State Bank of India, ICICI Bank, YES Bank and IDFC First Bank covering the four cities, the RBI said. Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will join this pilot subsequently.

Addition of more cities on the cards

The pilot would be later extended to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. The scope of pilot may be expanded gradually to include more banks, users and locations as needed. The RBI said that the retail digital rupee would be issued in the same denominations as the paper currency and coins and would be distributed through banks.

Multiple use cases

Users will be able to transact through a digital wallet offered by the participating banks and stored on mobile phones and other devices. Transactions can be both person to person and person to merchant.

"Payments to merchants can be made using QR codes displayed at merchant locations," the RBI said added that it offer features of physical cash like trust, safety and settlement finality.

"As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks."

Capitalising on the blockchain boom

In the Union Budget for 2022-23 (Apr-Mar), Finance Minister Nirmala Sitharaman had announced India's first own sovereign-backed central bank digital currency, which would be based on blockchain technology and would help boost the digital economy.

On Oct 7, the RBI issued a concept note on the digital currency explaining the objectives, benefits, choices and its approach towards the introduction of digital currency.

Subsequently, the first pilot for the central bank's digital currency in the wholesale segment was started on Nov 1, with banks trading government bonds in the secondary market through the digital rupee.

Positive response to pilots

On the first day, a total of 48 deals were struck and settled in the digital rupee, worth 2.75 bln rupees. The volume rose in following days, but has now tapered.

Trades aggregating 1.30 bln rupees were settled with the digital rupee pilot in 10 deals today.

Published on: Tuesday, November 29, 2022, 05:13 PM IST