GG News Bureau
New Delhi, 3rd Nov. The Reserve Bank of India (RBI) began a pilot launch of the Digital Rupee (e) in the Digital Rupee – Wholesale segment (e-W) in November. This pilot’s use case is the settlement of secondary market transactions in government securities. The pilot will include nine banks: 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 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. Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from this pilot,” RBI has said.
The RBI also stated that the first pilot in the Digital Rupee – Retail segment (e-R) is scheduled to begin within a month in select locations with closed user groups consisting of customers and merchants.
What is the Digital Rupee, also known as the e-Rupee or central bank digital currency?
CBDC is the same as central bank currency, but it takes a different form than paper currency (or polymer). It is sovereign currency in electronic form, and it would appear on a central bank’s balance sheet as a liability (currency in circulation). The underlying technology, form, and application of a CBDC can be modified to meet specific needs. CBDCs should be exchangeable for cash.
What distinguishes the RBI’s digital currency from other cryptocurrencies?
A CBDC, or RBI’s digital currency, is legal tender issued by a central bank in digital form. It is the same as fiat currency and can be exchanged for it one for one. Only the form is different. Meanwhile, other cryptocurrencies such as Bitcoin, Ethereum, and Dodgecoin are not considered legal tender. In fact, private cryptocurrencies are fraught with danger, and the volatility of their prices makes them a risky investment. The Indian government has repeatedly stated that cryptocurrencies are not legal in India.
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