Today, on November 1, The Reserve Bank of India or RBI will now launch the digital rupee for the wholesale segment, to later get an idea of its potential and feedback about its performance, under the first pilot test programme. Moreover, in one month’s time, RBI will also run a similar test to analyse the functioning of the digital rupee for the retail segment, but within a specific range of close customers and merchants.
Digital Rupee Launch For Wholesale Segment
As for the wholesale segment, this pilot run test for Digital Rupee will let RBI examine its functionality in the secondary market sector in Government Securities. These banks will participate 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.
“Use of e ₹-W (digital rupee) is expected to make the inter-bank market more efficient. Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk. Other wholesale transactions and cross-border payments will be the focus of future pilots, based on learnings from this pilot”, RBI’s statement reads.
These nine financial institutions have already registered and opened an account with RBI to participate in pilot tests and perform transactions in CBDCs. The money transactions will run smoothly and will be transferred instantly.
The CBDC concept was first introduced by Finance Minister Nirmala Sitharman while announcing the FY23 budget.
“RBI would roll out the digital equivalent of the rupee this fiscal. RBI has been pursuing CBDC’s launch to counter perceived threats posed by cryptocurrencies to financial stability”, she announced.
RBI defines CBDC “as the legal tender issued by a central bank in a digital form. It is akin to sovereign paper currency but takes a different form, exchangeable at par with the existing currency and shall be accepted as a medium of payment, legal tender and a safe store of value. CBDCs would appear as a liability on a central bank’s balance sheet.”