The Reserve Bank of India will debut the retail digital Rupee (e₹-R) today. This comes after the apex bank had said on October 31 that the launch of the digital Rupee would commence in a month’s time. The pilot would initially cover four cities, including Mumbai, New Delhi, Bengaluru and Bhubaneswar, and subsequently extend to other cities. While eight banks have been identified to be part of the pilot, the first phase will include only four.
All you need to know about India’s digital Rupee:
- Firstly, according to the RBI, the digital Rupee is a Central Bank Digital Currency (CBDC), a digital form of currency notes issued by a central bank. It said that the motivations of issuance of CBDC are specific to each country’s requirements.
- The first pilot of the digital Rupee would cover select locations in a closed user group that will include merchants and customers.
- The e₹-R will be a digital token, and will represent legal tender. The denominations will be the same as the paper currency and coins in circulation currently.
- The digital Rupee will be distributed through intermediaries, i.e banks. Users will be able to transact with digital Rupee through a digital wallet that will be offered by participating banks and will be stored on mobile phones and devices.
- The e₹-R can be used for both person-to-person and person-to-merchants transactions. QR codes can also be used for merchant payments.
- The RBI said that the digital Rupee will offer trust, safety and settlement finality. It will not earn any interest as is the case with cash, and can be converted to other forms of money, including deposits with banks.
- The pilot has been launched to test the robustness of the entire process of e₹-R creation, distribution and retail usage in real time. Based on the learnings of this pilot, different features and applications will be tested in future pilots.
- The first phase of the pilot will begin with four banks – State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank. Four more banks including Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will join the pilot subsequently.
- Mumbai, New Delhi, Bengaluru and Bhubaneswar will see the pilot roll out initially. The pilot will then subsequently cover other cities including Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla.
- RBI said that it expects digital Rupee to make the inter-bank market more efficient. “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. Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from this pilot,” it had said earlier.
- The apex bank said that the e₹-R is not substantially different from banknotes but since it is digital, it is likely to be easier, faster and cheaper, along with all other transaction benefits of other forms of digital money.
- The RBI has two basic considerations regarding the digital Rupee – to create a digital Rupee that is as close as possible to paper currency, and to introduce it in a seamless manner.
Watch: Retail Digital Rupee Pilot Project: All You Need To Know About e-Rupee
Also read: RBI announces launch of first pilot for digital Rupee on Dec 1
Also read: Digital Rupee coming on Dec 1: How will it work and what does it mean for you?