On December 1, RBI Will Begin the First Retail Digital Rupee Trial

"The pilot would cover select locations in a closed user group (CUG) comprising participating customers and merchants," the RBI said in a statement.

Highlights

  • A digital version of currency notes issued by the RBI is known as a Central Bank Digital Currency
  • The digital rupee would include characteristics of actual money, such as trust, safety, and finality of settlement.
  • According to the RBI, up to eight banks have been chosen to take part in this trial project in phases.

Reserve Bank of India

On Tuesday, the Reserve Bank of India (RBI) announced a trial programme for central bank digital currency (CBDC) for consumers beginning on December 1. The RBI stated that the digital rupee would take the form of a digital token that stands in for legal money.

"The pilot would cover select locations in closed user group (CUG) comprising participating customers and merchants" the RBI said in a statement.

It would be distributed in the same denominations that coins and paper money are now distributed in. It would be spread by means of middlemen, namely banks.

Users will be able to exchange digital rupee through a digital wallet provided by the collaborating banks and kept on mobile phones or other devices, according to the central bank.

"Both person-to-person (P2P) and person-to-merchant transactions are possible (P2M). QR codes displayed at merchant sites can be used to make payments to retailers "The sentence was read.

What is digital rupee?

A digital version of currency notes issued by the RBI is known as a Central Bank Digital Currency (CBDC) or a digital rupee. A sort of electronic money that can be used in contactless transactions is digital currency, or rupee.
Union Finance Minister Nirmala Sitharaman had earlier declared that the central bank would soon launch its digital currency when presenting the Union Budget 2022.

Digital Rupee Features

The digital rupee would include characteristics of actual money, such as trust, safety, and finality of settlement. Like cash, it won't accrue interest and can be changed into other kinds of payment like bank deposits. The pilot will assess the stability of the complete creation, distribution, and retail use of digital rupees in real time. Based on the lessons learned from this pilot, various features and uses of the digital rupee token and architecture will be evaluated in subsequent pilots.

Jaya Vaidhyanathan, CEO, BCT Digital said, "Since it provides a regulated alternative to cryptocurrencies in the market, the CBDC would lead to more robust and reliable payments, lowering the dependency on cash. The underpinning technology would make transaction costs low. Being interoperable with other payment systems, it will complement existing techniques like UPI, thus completing the mobile payments ecosystem."

8 banks identified

According to the RBI, up to eight banks have been chosen to take part in this trial project in phases.

The initial phase will start with four banks in four locations across India: State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank.

Four additional banks will eventually join this trial, including Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank.

Mumbai, Delhi, Bengaluru, and Bhubaneswar would be the first four cities the pilot would cover; afterwards, Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla would be added.

According to the central bank, the pilot's scope may be gradually expanded to cover more institutions, users, and locations as needed.

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