The Reserve Bank of India (RBI) said on Monday that the first pilot of the central bank digital currency (CBDC), the digital rupee, will begin on November 1. This pilot’s use case will be a secondary market transaction settling in government securities.

The adoption of the digital rupee is likely to make the interbank market more efficient, according to the RBI, because settlement in central bank money reduces transaction costs by eliminating the need for settlement guarantee infrastructure or collateral to offset settlement risk.

“Future pilots will focus on other wholesale transactions and cross-border payments based on the lessons learned from this pilot,” the RBI stated.


The central bank has picked nine banks to participate in this test. 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 are among these nine banks.

The digital rupee trial in the retail sector will commence soon (within a month) in limited areas and with closed user groups of customers and merchants, according to the RBI.

The RBI issued a concept note for CBDC earlier this month, stating that it is studying the creation of a digital currency with little disruption to the financial system. The RBI stated that it is working on a gradual rollout of CBDCs, beginning with pilots and progressing to a full launch.

According to the concept note, the Digital Rupee will supplement the already accessible forms of money. It is virtually identical to banknotes, but because it is digital, it is likely to be “easier, faster, and cheaper.”

The RBI defines CBDC as a digital legal tender issued by a central bank. CBDCs are intended to supplement, not replace, existing forms of money. They are intended to give users an extra means of payment. The central bank is considering a graduated approach to adopting an account-based CBDC in the wholesale sector and a token-based CBDC in the retail sector.

According to the concept note, the primary motivations for investigating the issuance of CBDC (Digital Rupee) in India include lowering operational costs associated with physical cash management, increasing efficiency and innovation in the payments system, boosting innovation in the cross-border payments space, and providing the public with uses that any private virtual currency can provide, without the associated risks.

The finance minister, Nirmala Sitharaman, had already indicated in her Union Budget speech this year that the RBI will issue a Digital Rupee in FY23.

A central bank digital currency (CBDC) is a digital currency issued by the central bank rather than a commercial bank. CBDCs was inspired by Bitcoin and other blockchain-based cryptocurrencies but differ from them in that a CBDC is or will be issued by a state. The majority of CBDC solutions will most likely not use or require a distributed ledger such as a blockchain.

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