RBI To Conduct Pilot For Digital Rupee Today

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RBI To Conduct Pilot For Digital Rupee Today
01 Nov 2022
6 min read

News Synopsis

The Reserve Bank of India (RBI) will introduce the digital rupee for the wholesale market today, November 1, as part of a pilot test programme to assess and improve the currency's usability.

The central bank will launch a similar test for the retail sector in exclusive user groups made up of customers and owners within a month, the RBI announced on Monday. According to the central bank, the pilot programme would evaluate the "settlement of secondary market transactions in government securities" for the wholesale market. The 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 are just a few of the nine lenders that will be involved.

The RBI released a concept note on central bank digital currency (CBDC) in October that addressed the benefits and risks of implementing these currencies. That means that CBDC broadly refers to legal cash issued digitally by a central bank. It can be traded at par with existing money and will be accepted as a form of payment, legal tender, and a safe location to store assets, much like sovereign paper currency but in a new format. CBDCs would appear as a liability on a central bank's balance sheet.

The use of the digital rupee is anticipated to improve the interbank market's efficiency. Settlement in central bank money would reduce transaction costs since it would eliminate the need for infrastructure or collateral to reduce settlement risk, according to the RBI. Due to the knowledge gathered from this trial, future pilot projects will focus on other wholesale transactions and cross-border payments.
 

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