RBI to Pilot India’s CBDC with 4 Public Sector Banks

RBI to Pilot India’s CBDC with 4 Public Sector Banks

The Reserve Bank of India (RBI), the central bank of the nation, has reportedly asked four public sector banks to pilot the Central Bank Digital Currency (CBDC) ahead of its public launch.

RBI Plans to Launch Digital Currency this Fiscal 

The Reserve Bank of India (RBI), the central bank of the country, has reportedly asked four public sector banks to pilot India’s Central Bank Digital Currency (CBDC), Moneycontrol reported on Monday. Senior bank officials quoted:

"The RBI has asked the State Bank of India, Punjab National Bank, Union Bank of India, and Bank of Baroda to run the pilot internally."

"There is a pilot on CBDCs," another senior public sector bank official confirmed to the publication. "The RBI may launch the CBDC this year. When it will roll out the product and specifications that remains to be seen."

The Reserve Bank of India is also reportedly consulting with several fintech companies on the digital rupee. Among them is the U.S. firm FIS, which has been advising central banks on CBDC issues, such as offline and programmable payments, financial inclusion, and cross-border CBDC payments.

FIS Senior Director Julia Demidova told the News publication last week:

"FIS has had various engagements with the RBI... Our connected ecosystem could be extended to the RBI to experiment with various CBDC options."

"Whether it is a wholesale or retail CBDC transaction, our technology can also be extended to commercial banks where they can test and tokenize central bank money in the form of digitally regulated money," she added.

The Finance Minister, Nirmala Sitharaman, while presenting the federal budget 2022 in February announced that the RBI will issue a CBDC in this financial year. In May, the central bank said that it will adopt a "graded approach"  to launching the digital rupee.

"The digital rupee will be the digital form of our physical rupee and will be regulated by the RBI. This will be such a system that will enable an exchange of physical currency with digital currency," Prime Minister Narendra Modi had explained. 

Meanwhile, the RBI is advocating for a ban on all cryptocurrencies such as bitcoin and ether. RBI Deputy Governor T. Rabi Sankar said earlier this year that cryptocurrencies have "no underlying cash flows" and "no intrinsic value," adding that "they are akin to Ponzi schemes, and may even be worse." The central banker stressed, "Banning cryptocurrency is perhaps the most advisable choice open to India."