The Reserve Bank of India has roped in the State Bank of India, ICICI Bank, HDFC Bank, and IDFC First Bank to work with it on a pilot project for its digital currency for the digital market, reported The Economic Times.
The report cited people familiar with the matter and said that the RBI might add more banks to run the pilot that is expected to be launched soon. The RBI is working on two fronts to test the central bank digital currency (CBDC) called the Digital Rupee – one for the wholesale market that already has a pilot project underway and the other for the retail market (CBDC-R) that is to be launched soon.
RBI is also debating if they need to build a new framework or to make the retail CBDC interoperable with the current digital payment system.
The pilot for the Digital Rupee Wholesale segment began on November 1. In this pilot, 48 G-Sec trades were carried out and were worth Rs 275 crore. The digital currency released by the RBI is aimed at reducing the dependency on cash, as in the Indian economy it forms nearly 80 per cent of overall retail transactions.
The CBDCs are based on the same blockchain technology as other private cryptocurrencies and are aimed at reducing the dependency on cash. The retail CBDC is conceptualised to be used by all citizens, but the wholesale CBDC will be restricted to only selected financial institutions.
In a concept note the central bank had suggested that it might consider anonymity for CBDC retail payments that valued less than Rs 50,000. This is similar to when people make transactions in cash in small amounts.
After private cryptocurrencies got popular, several countries have been considering launching their own digital currencies.