The Reserve Bank of India (RBI) announced the launch of the first pilot for retail digital Rupee (e₹-R) on Tuesday. The pilot will commence on December 1.
The RBI in a statement said the pilot would cover select locations in closed user groups (CUG) comprising participating customers and merchants. The e₹-R would be in the form of a digital token that represents legal tender. It would be issued in the same denominations that paper currency and coins are currently issued and would be distributed through banks.
Users will be able to transact with the digital Rupee through a digital wallet offered by the participating banks and will be stored on mobile phones. Transactions can be both Person to Person (P2P) and Person to Merchant (P2M). Payments to merchants can be made using QR codes displayed at merchant locations.
“The e₹-R would offer features of physical cash such as 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,” it added.
The pilot is said to 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.
Currently, eight banks have been identified for phase-wise participation in this pilot. According to the RBI, the first phase will begin with four banks — State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank — in four cities across the country. Four more banks — Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank — will join this pilot subsequently. The pilot would initially cover four cities — Mumbai, New Delhi, Bengaluru and Bhubaneswar — and later extend to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla.
The RBI also added that the scope of the pilot may be expanded gradually to include more banks, users and locations as needed.
The RBI also launched the first pilot of the digital Rupee in the wholesale segment on November 1 and said the use case for this pilot was the settlement of secondary market transactions in government securities.
The digital Rupee is a form of Central Bank Digital Currency (CBDC), which is a digital form of legal tender issued by the RBI.
