Reserve Bank of India (RBI) is launching the first pilot for retail digital rupee (e₹-R) in New Delhi, Mumbai, Bengaluru and Bhubaneswar on Thursday (December 1). It will later expand to nine more cities in the initial phase. The move comes a month after the RBI launched a pilot in the digital rupee-wholesale segment on November 1.
What is Retail Digital Rupee? It is India’s first central bank digital currency (CBDC), or a digital or virtual currency, that can be used for retail purchases. Like paper currency, it is also issued by the Reserve Bank of India. “The e-R will be in the form of a digital token representing legal tender,” RBI said on Tuesday.
Can you use digital money now? Right now not everyone will be able to use digital money. It is in pilot mode. RBI has said that the pilot launch will cover select locations in the Closed User Group (CUG) consisting of participating customers and merchants. The scope of the pilot can be gradually expanded to include more users.
Will there be a need for an app for digital money? Users will be able to transact with Digital Rupee, or e₹-R, through digital wallets offered by participating banks and stored on mobile phones/devices. Through Digital Rupee, users will be able to make payments to other users (person-to-person) as well as make purchases (person-to-merchant) at stores.
The distribution of retail digital rupee will be done through intermediaries, ie banks.
Which banks will distribute digital rupee? According to the RBI statement, eight banks have been identified for phased participation in this pilot. The first phase will start with four banks – State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank in four cities across the country. Four more banks – Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank – will join the pilot later.
What will be the denominations of the digital rupee? It will be issued in the same denominations in which paper currency and coins are issued at present.
Which cities have been included in the pilot launch? The pilot will initially cover four cities – Mumbai, New Delhi, Bengaluru and Bhubaneswar – and later expand to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. The pilot can be gradually scaled up to include more banks, users and locations, as required.
Is Digital Rupee Same as Crypto Currency? No. The digital rupee is a CBDC, or a digital or virtual currency. This is in contrast to private virtual currencies or cryptocurrencies, including bitcoin, ethereum, etc., which have rapidly emerged over the past decade. Private virtual currencies do not represent debts or liabilities of any individual as there is no issuer.
Is digital rupee the same as digital money? No. In digital money, the liability is on the banks. But, in the case of digital rupee, the liability lies with RBI.
Is Digital Rupee Safe? Yes. Digital Rupee will provide features of physical cash like trust, security and finality of settlement.
Will the digital rupee earn interest in the wallet? No, as in the case of cash, it will not earn any interest and can be converted into other forms of money, such as deposits in banks.
Why have a pilot launch? The pilot will test the robustness of the entire process of creation, distribution and retail use of the digital rupee in real time. Based on the learnings from this pilot, various features and applications of the e₹-R token and architecture will be tested in future pilots.
Worldwide, over 60 central banks have expressed interest in CBDCs in both retail and wholesale categories with some implementations already under pilot and many more are researching, testing and/or launching their own CBDC frameworks. Huh.
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