Having begun a wholesale CBDC in November 2022, India’s apex bank is advancing in its plans for a retail CBDC as well, with a pilot which launched in December 2022.
RBI launches the pilot for retail Digital Rupee (e₹-R) today for a closed user group.https://t.co/EEC7RoWQMc#RBI #RBItoday #CBDC #DigitalRupee
— ReserveBankOfIndia (@RBI) December 1, 2022
The Reserve Bank of India is already working with several commercial banks to test the retail CBDC, including the State Bank of India, ICICI Bank, IDFC First Bank, and HDFC Bank.
The bank is collaborating with more commercial banks in the wholesome CBDC, with the likes of Bank of Baroda and HSBC joining the banks in the retail CBDC list.
“The use case for this pilot is the settlement of secondary market transactions in government securities,” the regulator mentioned in a notification on October 31, 2022.
India published a concept note for its CBDC in October 2022 highlighting some of the features, motivations, and a roadmap for the digital rupee. Below is an excerpt from the note:
“CBDCs have some clear advantages over other digital payments systems, as it being a sovereign currency, ensures settlement finality and thus reduces settlement risk in the financial system. CBDCs could also potentially enable a more real-time, cost-effective seamless integration of cross border payment systems.”
Features highlighted include:
- CBDC is a sovereign currency issued by central banks in alignment with their monetary policy
- It appears as a liability on the central bank’s balance sheet
- It must be accepted as a medium of payment, legal tender, and a safe store of value by all citizens, enterprises, and government agencies
- CBDC is freely convertible against commercial bank money and cash
- CBDC is a fungible legal tender for which holders need not have a bank account
- CBDC is expected to lower the cost of the issuance of money and transactions
When it comes to the reasons behind a CBDC, India says central abnks are faced with the problems of dwindling usage of paper currency and electronic currency is seen as a solution.
CBDCs are also seen as a better option by countries that experience geographical barriers to the movement of cash, including nations such as the Bahamas and the Caribbean.
Finally, central banks want to meet the needs of users, many of who have turned to private currencies.
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