Global Economy

RBI plans to expand applications of digital rupee in future pilot projects

The Reserve Bank of India is considering expanding the use cases of the digital rupee after it completes the ongoing pilot project with the virtual version of the currency. The regulator is also looking to add more banks to the e-rupee project to test a wider gamut of use cases.

“Based on the learnings from the current pilot, other features and applications of e-rupee token and architecture may be tested in future pilots,” the central bank said as part of its financial stability report. “The first phase has begun with four banks, and more banks will join this pilot subsequently.”

The first pilot e-rupee in the retail segment was launched on December 1, in select locations in a closed user group comprising merchants and customers.

According to the regulator, the digital rupee will provide the public with a risk-free medium of exchange as it represents a direct liability of the central bank, with features of physical cash like trust, safety and immediate settlement finality in digital transactions.

In the current pilot project, use cases of person-to-person (P2P) and person-to-merchant (P2M) transactions in a closed user group are being tested. It will also test the robustness of the entire process of the digital rupee creation, distribution and retail usage in real-time.

Mint Street will also expand the wholesale rupee project to more wholesale transactions and cross-border payments.

“Wholesale digital rupee is expected to make the inter-bank market more efficient and reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk,” the central bank said. “Based on the learnings from this pilot, other wholesale transactions and cross-border payments will be the focus of future pilots.”
A pilot for the e-rupee in the wholesale segment, for settlement of secondary market transactions in government securities, was launched on November 1 with the participation of nine banks.

The central bank-backed digital currency (CBDC) is similar to the physical currency in terms of being a legal tender, accepted as a medium of payment and a safe store of value. The e-rupee will provide an additional form of money to be used by the public.


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