RBI To Launch Digital Rupee pilot for wholesale segment to from November 1

The Reserve Bank of India (RBI) is all set to start a pilot project with its own virtual currency

The Reserve Bank of India  (RBI) will become one of the first major central banks in the world to start a pilot project with its own virtual currency when the wholesale digital rupee is used on a trial basis from Tuesday — initially for settlement of transactions in government securities.

The banking regulator said on Monday that though the pilot project will initially be limited up to government securities but a retail version of the digital rupee will be launched in a month.

Nine banks were identified for participation in the wholesale e-rupee (e-W) pilot project namely – State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC.

The RBI said in a statement that the use of the pilot is for the settlement of secondary market transactions in government securities. They also explained how the use of e-W is expected to make the inter-bank market more efficient.

“This is now for real-time trading and settlement of government securities among the nine banks. During the pilot phase, the central bank will issue the CBDC currency to each bank’s CBDC account at regular intervals and on demand, the bonds will settle in the SGL account with day end and pre-trade checks to ensure end-to-end operationalisation,” said Anita Mishra, MD & Head of Markets & Securities Services, HSBC India. “The aim is to ensure the operational part is fully functional before going deeper into other use cases and Distributed Ledger Technology (DLT), all of which will come with good time.”

The regulator also said settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risks. It even mentioned that as days go by and based on the learnings from this pilot,other wholesale transactions, and cross-border payments will be the focus of future pilots.

The first pilot in the Digital Rupee-Retail segment (e-R) is planned for launch within a month in select locations in closed user groups comprising customers and merchants, the central bank said. The RBI has in the past said there should be a degree of anonymity — at least in small-value digital transactions — for it to become acceptable tender.

“Reasonable anonymity for small-value transactions akin to anonymity associated with physical cash may be a desirable option for CBDC-R,” the RBI had said in its concept note.