After a successful experiment of digital rupee earlier this month, the Reserve Bank of India (RBI) has announced another pilot program which will start next month. The new pilot will be for the retail segment, while the earlier pilot was for the wholesale segment.
RBI will start pilot for retail central bank digital currency (CBDC) in the country on December 1. The pilot will be conducted at select locations in Closed User Groups (CUGs) comprising customers and merchants.
Digital Rupee pilot for retail begins on December 1
The RBI on Tuesday confirmed that the pilot of the digital rupee for the retail sector will begin on December 1. Digital Rupee will be used as a digital token that represents legal tender.
The distribution of e-Rupee (e₹) will be done through intermediaries ie banks. According to RBI, users will be able to transact with the digital rupee through digital wallets offered by participating banks.
Payments can be made to merchants using the QR code displayed at merchant locations. It is also worth noting that e₹ can be converted into various forms of money such as deposits in banks. However, in such cases, no interest will be generated.
Eight banks have been identified for this pilot and four will participate in the first phase. Banks include State Bank of India, Union Bank of India, Yes Bank, IDFC First Bank, ICICI Bank, HDFC Bank, Kotak Mahindra Bank and Bank of Baroda.
What is Digital Rupee?
Digital Rupee is a digital currency issued by RBI. It is also called Central Bank Digital Currency (CBDC).
What is the use of digital rupee?
According to RBI, the digital rupee will be used by the government (as of now) as a digital token that represents legal tender.
Earlier, the Central Bank had said that e₹ or digital rupee would be used for settlement of secondary market transactions in government securities. This is said to make the interbank market (transactions between banks) more efficient.
Will digital rupee replace physical cash?
No, the digital rupee will not replace physical cash, nor will it replace cryptocurrencies. e₹ will only provide additional options for currently available funds.
How is digital rupee different from cryptocurrency?
According to RBI, the digital rupee is no different from bank notes. It is only in the digital form of money that it is faster and easier to settle transactions.
Cryptocurrencies, on the other hand, are completely different and are recorded on a blockchain platform.
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