The Reserve Bank of India (RBI) is gearing up to launch a pilot program for the Central Bank Digital Currency (CBDC), commonly referred to as the Digital Rupee. This initiative is expected to facilitate interbank transactions, specifically in the call money market, and is set to kick off around October.
Background:
Last November, the RBI initiated the pilot phase for the wholesale CBDC, known as Digital Rupee-Wholesale (e-W), with a focus on settling secondary market transactions involving government securities. Subsequently, a pilot for the retail CBDC began on December 1. The recent announcement by RBI’s Executive Director, Ajay Kumar Choudhary, sheds light on the extension of the wholesale CBDC’s use into the call money market.
Purpose of Extension:
The decision to extend the wholesale CBDC to the call money market aims to experiment with various markets and technologies. This move is in line with the government’s vision to introduce CBDC, as outlined in the Union Budget for 2022-23. To facilitate this, necessary amendments were made to the RBI Act 1934 through the Finance Bill 2022.
CBDC Versions:
The RBI introduced two versions of the Digital Rupee: CBDC-Wholesale (CBDC-W) and CBDC-Retail (CBDC-R). CBDC-W is designed for limited access, available exclusively to select financial institutions. On the other hand, CBDC-R is intended for broader usage, including private sector entities, non-financial consumers, and businesses.
Participating Banks:
Nine prominent banks were selected to participate in the pilot project for the wholesale CBDC. These banks include State Bank of India (SBI), Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, YES Bank, IDFC First Bank, and HSBC. Users of the retail e-Rupee can engage in transactions using a digital wallet provided by these participating banks.
Denominations:
The retail e-Rupee is available in various denominations, including 50 paise, 1, 2, 5, 10, 20, 50, 100, 200, etc. In contrast, the wholesale e-Rupee does not specify denominations, as indicated in the RBI’s annual report for 2022-23.
Digital Initiatives Showcase:
At the recent G20 Leaders’ Summit, the RBI showcased several digital initiatives within the financial sector. These include the Public Tech Platform (PTP) for Frictionless Credit, CBDC, UPI One World, RuPay On-The-Go, and the Bharat Bill Payment System.
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