The pilot began on December 1, 2022, according to a press statement signed by Yogesh Dayal, chief general manager of the RBI. In October, the central bank hinted that the experiment will launch in December, and the latest release provides clarity to all interested parties.
“The pilot will test the robustness of the entire process of digital rupee creation, distribution, and retail usage in real-time,” RBI’s statement read.
The pilot begins with an initial clutch of four financial institutions, namely the State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. After the initial round of experimentation, the RBI confirms that four more banks will join the pilot, including Union Bank of India, Bank of Baroda, HDFC Bank, and Kotak Mahindra Bank.
In terms of technicalities, India’s central bank says a closed user group (CUG) will be deployed consisting of a select number of merchants and customers. It notes that the e-rupee will take the form of a digital token for the purpose of the pilot and will be issued in the same denominations as paper currency in circulation.
Selected users can interact with the e-rupee through a digital wallet provided by the participating banks which is accessible via mobile devices. The central bank says transactions can be facilitated between individuals or with Person-to-Merchant (P2M) via QR codes provided at locations.
Thirteen cities will be covered during the pilot, but at the start date, only Mumbai, New Delhi, Bengaluru, and Bhubaneswar will be supported, with the rest coming on board subsequently. The RBI confirmed that the CBDC will not bear any interest like cash and can be converted to other forms.
It’s been a long time coming for India
India has been mulling over CBDCs for over a year to mitigate the increasing “cryptoization” of its economy. After months of consultations with relevant stakeholders, the RBI published a 50-page concept note on CBDC and began the pilot of wholesale CBDC on November 1.
The government defended the launch of the wholesale pilot on the grounds that it would reduce transaction costs while being deployed for the “settlement of secondary market transactions in government securities.”
India’s CBDC may not use distributed ledger technology (DLT) as the government has previously disclosed its preference for centrally-controlled conventional database infrastructure.
“Given the above, DLT at this point in time is not considered suitable technology except in very small jurisdictions, given the probable low volume of data throughput,” said RBI.
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