RBI to Launch First Pilot of Retail Digital Rupee in 4 Cities on December 1

Mumbai: The Reserve Bank will launch the first pilot for retail digital rupee (e₹-R) in Mumbai, New Delhi, Bengaluru, and Bhubaneswar on December 1, and later expand it to nine more cities in the initial phase.

This follows a month after the RBI started a pilot in the digital rupee–wholesale segment on November 1. The Reserve Bank announced the launch of the first pilot for retail digital rupee (e₹-R) on December 1, 2022, the central bank said in a statement on Tuesday.

The initial phase of the retail digital rupee will start with four banks – State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank – in four cities across the country.

“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,” the RBI said while announcing the operationalization of the Central Bank Digital Currency – Retail (e₹-R) Pilot from December 1.

CBDC is a digital form of currency notes issued by a central bank. While most central banks around the world are exploring issuing CBDCs, the key motivations for their issuance are specific to each country’s unique needs. The digital rupee would be distributed through intermediaries (banks).

Users will be able to transact with e-R through digital wallets offered by participating banks and stored on mobile phones/devices, RBI said. Transactions can be both Person to Person (P2P) and Person Merchant (P2M). Payments can be made to merchants using the QR code displayed at merchant locations.

The e₹-R would 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,” the central bank said.

The pilot, it said, will test the robustness of the entire process of digital rupee creation, distribution, and retail usage in real-time. Various elements and applications of the e₹-R token and architecture will be tested in future pilots, based on the learnings from this pilot.

It further said that the pilot will cover select locations in a closed user group (CUG) of participating customers and merchants. Eight banks have been identified for phase-wise participation in the pilot.

After State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank, four more banks — Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank — will join the pilot subsequently.

The other nine cities to which the pilot will be later extended are Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.

The Reserve Bank said that the scope of the pilot may be gradually expanded to include more banks, users, and locations. Last month, the RBI said digital rupee – wholesale will help in reducing transaction costs by pre-empting the need for settlement guarantee infrastructure or collateral to mitigate settlement risk.

Click Here for the Official Press Release From RBI

The Government of India declared the launch of the Digital Rupee from the financial year 2022-23 in the Union Budget presented in the Parliament on February 1, 2022.

In a recent concept note on Central Bank Digital Currency, the RBI said CBDC is aimed to complement, rather than replace, current forms of money and is envisaged to provide an additional payment avenue to users, not to replace the existing payment systems.

Across the globe, more than 60 central banks have expressed interest in CBDCs with a few implementations already under pilot across both retail and wholesale categories, and many others are researching, testing, and/or launching their own CBDC framework.