RBI Begins First Retail Digital Rupee Pilot with 8 Banks in 13 Cities

RBI Begins First Retail Digital Rupee Pilot with 8 Banks in 13 Cities

The Reserve Bank of India (RBI) is launching its first retail digital rupee pilot on Dec. 1 with the participation of eight banks. The pilot will start in four cities and then expand to over nine more cities across India.

RBI to Test Retail Digital Rupee

The Reserve Bank of India (RBI) announced on Tuesday that "the first pilot for retail digital rupee (e₹-R)" will launch on December 1. This announcement followed the RBI’s wholesale central bank digital currency (CBDC) pilot, which began on Nov. 1.

Eight banks will participate in the retail digital currency pilot in two phases. The State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank will participate in the first phase in four cities across India. Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank will participate in the second phase.

The pilot will cover Mumbai, New Delhi, Bengaluru, and Bhubaneswar in the first phase, and later extend to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla in the second phase.

"The scope of [the] pilot may be expanded gradually to include more banks, users, and locations as needed," the RBI said.

About the Digital Rupee

The Indian central bank said, "The e₹-R would be in the form of a digital token that represents legal tender."

The digital rupee will be issued in the same denominations that paper currency and coins are currently issued, and it will be distributed through intermediaries, such as banks.

"Users will be able to transact with e₹-R through a digital wallet of the participating banks and store them on mobile phones or other devices," the RBI has detailed. Transactions can be person-to-person (P2P) or person-to-merchant (P2M). Merchants will display QR codes that can be used to make payments.

"The e₹-R would offer features of physical cash like trust, safety, and settlement finality. However, it will not earn any interest and can be converted to other forms of money, like deposits with banks," the RBI has explained. 

"The pilot will test the robustness of the entire process of digital rupee creation, distribution, and retail usage in real time. Different features and applications of the e₹-R token and architecture will be tested in future pilots, based on the learnings from this pilot," the RBI concluded.