The Reserve Bank of India (RBI), India’s central bank, will launch its first digital rupee pilot on November 1 with the participation of nine banks. The central bank said, “Settlement in central bank money will reduce transaction costs by pre-empting the need for payment guarantee infrastructure and collateral to mitigate settlement risk.”
RBI’s first CBDC pilot starts on November 1
India’s central bank, the Reserve Bank of India (RBI), on Monday announced that “the first pilot of the Digital Rupee – Wholesale segment (e₹-W) will start on November 1, 2022.” The announcement added.
Nine banks – 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 – have have decided to participate in the pilot.
RBI explains, “The use case for this pilot is the settlement of secondary market transactions in government securities. ‘The use of e₹-W is expected to make the interbank market more efficient. Settlement with central bank funds will reduce transaction costs by avoiding the need for settlement guarantee infrastructure and collateral to mitigate settlement risk.”
RBI said that future pilot efforts will focus on other wholesale transactions and cross-border settlement. It will also take into account the findings from the initial pilot.
The central bank further elaborated.
The first pilot of the digital rupee-retail segment (e₹-R) will be launched within a month in selected locations with a closed user group of customers and merchants.
Earlier this month, India’s central bank released a report outlining various aspects and risks of central bank digital currency (CBDC).
According to the Atlantic Council’s Center for Geography and Economics, 105 countries, representing over 95% of global GDP, are currently considering CBDCs. In addition, the Bank for International Settlements (BIS) released a report in May stating that nine out of ten of the world’s central banks are considering CBDCs, with the BIS stating:” The emergence of stablecoins and other cryptocurrencies has accelerated work on CBDCs.”
Meanwhile, the United States has not decided whether to issue a central bank digital currency. Federal Reserve Chairman Jerome Powell recently said that a digital dollar would take at least a couple of years. Some lawmakers are not convinced about the need for a digital dollar, including Fed Governor Christopher Waller, who said last week that he is not in favor of the Fed issuing a central bank digital currency (CBDC).
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