The Reserve Bank of India (RBI) is set to launch the retail digital rupee on December 01, 2022, on a pilot basis. It has identified eight banks for phase-wise participation in this trial.
The first phase will begin with four banks – State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank in four cities across the country. Four other banks — Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank — will join the trial later. The first pilot for its retail digital rupee will mark the first step towards the adoption of a retail digital rupee or retail central bank digital currency (retail CBDC).
The retail digital rupee will be a legal tender in the form of a digital token in the same denominations that paper currency and coins are issued. The digital wallets offered by banks participating in the RBI’s digital rupee programme can transact in digital currency, where person-to-person (P2P) and person-to-merchant (P2M) transactions can be made. Payments to merchants can be made using QR (Quick Response) codes displayed at merchant locations
Similar to physical cash, the retail digital rupee will have features like trust, safety, and settlement finality. However, it will not earn any interest.
Users will transact the digital rupee tokens through a digital wallet similar to the other wallets held on the phones but the liability of the digital rupee will show on the balance sheet of the central bank. With the introduction of the digital rupee, the RBI aims to provide a kind of money that has three attributes: it is issued by the central bank, it is universally accessible, and it is in electronic form.
In the budget speech for FY23, Finance Minister Nirmala Sitharaman said that a CBDC to be issued “using blockchain and other technologies”, “will give a big boost to the digital economy” and “also lead to a more efficient and cheaper currency management system.”
The pilot project will cover Mumbai, New Delhi, Bengaluru, and Bhubaneswar and will later extend to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla, RBI said.
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