RBI launches first pilot project for Digital Rupee

On November 1, 2022, India launched its first #digitalrupee pilot project. A central-bank-backed digital rupee for the wholesale segment has been launched as a pilot program by the Reserve Bank of India (RBI) .

Nine banks were selected to participate in the digital rupee's wholesale pilot

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 among the nine banks.

What is a Digital Rupee?

Digital Rupees or Central Bank Digital Currency (CBDC) are electronic versions of currency notes issued by central banks. Contactless transactions can be conducted using digital currency, or rupees.

Central Bank Digital Currency can be classified into two types

• The retail CBDC (CBDDC-R) would potentially be available to everyone
• Wholesale (CBDC-W) is for financial institutions with restricted access.

Why is Digital Rupee Beneficial?

• Transparency and efficiency will increase with a digital rupee. Ledgers will be managed in real time using blockchain technology. Additionally, a digital rupee is expected to promote financial inclusion and effective fiscal and monetary policy implementation.
• In real-time, transaction costs can be reduced and account settlements can be sped up with the digital rupee. There is a lag between banks updating their ledgers.
• The digital rupee would also be accessible round-the-clock, and no bank account would be required.
• Cross-border transactions will be streamlined. The export process today involves multiple layers of banks, each charging a transaction fee. Deals can be made directly between traders with the digital rupee.
• The digital rupee will be backed by RBI, not other cryptocurrencies. The risk of volatility will be mitigated.
• They are damage-free. Digital rupees cannot be damaged by wear and tear or lost during movement, unlike currency notes.

RBI has been exploring the pros and cons of a central bank digital currency. It said earlier this month it is preparing a phased implementation plan.

Stay tuned for more updates!

We'd love to hear what you think about Digital Rupee!

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