RBI to launch a pilot project on retail digital Rupee (e₹-R) on 1 December 2022

Tags: Economy/Finance

The Reserve Bank of India has announced on 29 November 2022 that it will launch a pilot project on retail digital rupee (e₹-R) on 1 December 2022. The RBI had earlier launched the first pilot project of the Digital Rupee for the Wholesale segment (e₹-W) on November 1, 2022. 

Banks participating in the pilot project 

According to the RBI 8 banks have been identified for phase-wise participation in this pilot project.

 In the first phase four banks, State Bank of India, ICICI Bank, Yes Bank and IDFC will participate.

 In the second phase four more banks Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will join this pilot project.

Place where the pilot project will be launched 

According to the RBI initially the pilot project will be launched in Mumbai, New Delhi, Bengaluru and Bhubaneswar. 

In the second phase it will be extended to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. 

Feature of the Pilot project 

The pilot project would cover select locations in a closed user group - CUG comprising participating customers and merchants. The digital Rupee would be in the form of a digital token that represents legal tender. 

Users will be able to transact with digital Rupee through a digital wallet offered by the participating banks and stored on mobile phones. Transactions can be both Person to Person and Person to Merchant.

Payments to merchants can be made using QR codes displayed at merchant locations. 

The pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real-time. 

Digital Currency 

It is a legal tender issued by a central bank in a digital form. It is similar to sovereign paper currency (Indian Rupee) but takes a different form. It will not be in paper form but in digital format.