RBI announces launch of first retail digital rupee pilot on December 1 | News Bharat

The Reserve Bank of India (RBI) announced on Tuesday that it will conduct a retail central bank digital currency (CBDC) pilot on December 1. The RBI said the digital rupee will take the form of a digital token representing fiat currency.

“The pilot will cover selected locations in Closed User Groups (CUGs), which include participating customers and merchants,” the RBI said in a statement.

It will be issued in the same denomination as banknotes and coins currently issued. It will be distributed through intermediaries (i.e. banks).

The central bank also said that users will be able to transact with digital rupees through digital wallets provided by participating banks and stored on their phones or devices.

“Transactions can be person-to-person (P2P) and person-to-merchant (P2M). Payments to merchants can be made using a QR code displayed at the merchant’s location,” reads the statement.

What is a digital rupee?

The Central Bank Digital Currency (CBDC) or digital rupee is a digital form of banknote issued by the RBI. Digital currency or rupee is an electronic form of money that can be used for contactless transactions.

Union Finance Minister Nirmala Sitharaman announced when introducing the Union Budget 2022 that the central bank will launch its digital currency soon.

Digital Rupee Features

A digital rupee will provide the characteristics of physical cash such as trust, security and settlement finality. Like cash, it doesn’t earn any interest and can be converted into other forms of money, such as bank deposits.

The pilot will test the robustness of the entire process of digital rupee creation, distribution and retail use in real-time. Different functions and applications of the digital rupee token and architecture will be tested in future pilot projects based on the experience gained from this pilot project.

8 banks identified

The RBI said as many as eight banks have been identified to participate in the pilot in phases.

The first phase will start with four banks in four cities across India – State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank.

Subsequently, four banks including Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will join the pilot.

The pilot will initially cover four cities – Mumbai, Delhi, Bengaluru and Bhubaneswar – and later expand to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Cochin, Le Know, Patna and Shimla.

The central bank said the scope of the pilot may be gradually expanded as needed to include more banks, users and locations.

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