The Reserve Bank of India (RBI) will be among the first major central banks in the world to begin a pilot project with its own virtual currency when the wholesale digital rupee is utilised on a trial basis. The digital rupee at wholesale is made for dealings between banks and related wholesale operations, according to the central bank.
The RBI said in a press release that a pilot programme for the Digital Rupee (e-rupee) will start in government securities on November 1, 2022. This will be in the wholesale segment (e?-W).
The RBI has selected nine banks to take part in the pilot programme: State Bank of India, HDFC Bank, ICICI Bank, Union Bank of India, Kotak Mahindra Bank, Bank of Baroda, IDFC First Bank, Yes Bank, and HSBC.
The Reserve Bank of India said that the pilot project’s use case will be secondary market transactions involving government securities. “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,” said the central bank
It went on to say, “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. Based on the learnings from this pilot, other wholesale transactions and cross-border payments will be the focus of future pilots, based on the learnings from this pilot.”
The RBI explained that the first pilot for the Digital Rupee – Retail segment (e-R) will start within a month in a few locations with a small number of customers and merchants. Details pertaining to the operationalisation of the e-R pilot will be disclosed in due time.
What is a Digital Rupee (e-rupee)?
The RBI is looking into a digital version of the Indian rupee called the e-rupee, or digital rupee. The Reserve Bank of India (RBI) wants to make two versions: one for interbank settlement and one for the public. The RBI stated in a concept note dated 7 October 2022, “The e₹ will provide an additional option to the currently available forms of money. It is substantially not different from banknotes, but being digital it is likely to be easier, faster and cheaper. It also has all the transactional benefits of other forms of digital money.”
The RBI has also stressed that the e-rupee is not intended to replace traditional currencies but rather to complement them. It’s not intended to replace current payment methods, but rather to offer additional payment choices to users.