India’s Central Bank to Start Retail CBDC Pilot on December 1

Lavina Daryanani
Source: Vidhi Centre for Legal Policy

On Tuesday, India’s central bank—The Reserve Bank of India (RBI)—announced the launch date for the first pilot of the country’s retail Central Bank Digital Currency [CBDC]. The Digital Rupee, as such, will be in the form of a digital token that represents legal tender, the RBI said.

Chalking out the date, the latest press release noted,

The Reserve Bank announces the launch of the first pilot for retail digital Rupee (ex-R) on December 01, 2022.

Notably, the Digital Rupee will be distributed via intermediaries, i.e., banks. Users will be able to transact with the “e₹-R” through a digital wallet offered by the participating banks. It can be stored on mobile phones and other devices. Transactions can be both Person to Person (P2P) and Person to Merchant (P2M). In fact, payments pertaining to the latter category can be made using QR codes displayed at merchant locations.

Outlining what to expect from the upcoming pilot launch, The RBI’s statement noted,

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 ex-R token and architecture will be tested in future pilots, based on the learnings from this pilot.

Where do other countries stand?

Leaving aside India, a host of other nations around the world have been making progress on the CBDC trial-and-testing front. The Bank of Japan, for instance, is planning to launch its Digital Yen CBDC pilot in early 2023. As such, the central bank’s plan is to experiment with the digital pilot for two years and then discuss and decide whether to move forward with the issuance in 2026. However, the banks that are participating in the experiment have not yet been revealed.

Parallelly, Singapore has collaborated with French and Swiss Central banks for its CBDC Project. As reported recently, the MAS has embarked on its journey to explore the prospects of CBDC for cross-border transactions. The country’s national bank went on to label the said project Ubin+.

Read More: Singapore collaborates with French & Swiss Central banks for CBDC Project

Cities and Banks in India’s Picture

As of now, eight banks have been identified for phase-wise participation in India’s pilot. The first phase will begin with four banks—State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank—in four cities across the country. Four additional banks—Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank—will join the pilot subsequently.

With respect to the cities to be involved in the testing, RBI’s statement noted,

The pilot would initially cover four cities, viz., Mumbai, New Delhi, Bengaluru, and Bhubaneswar and later extend to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.

The scope of the pilot would be expanded gradually to include more banks, users, and locations as needed.