India will undertake the first pilot for retail digital currency on December 1, the central bank said Tuesday, extending the test to evaluate the creation and distribution of the digital currency in the South Asian market with a closed group of customers and merchants a month after it began evaluating the CBDC for the wholesale segment.
Four local banks — State Bank of India, ICICI Bank, Yes Bank and IDFC — will participate in the initial phase of the pilot in four cities (Mumbai, New Delhi, Bengaluru and Bhubaneswar). Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will join the pilot “subsequently,” the Reserve Bank of India said. The pilot will eventually be expanded to cover the cities of Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla.
“The scope of pilot may be expanded gradually to include more banks, users and locations as needed,” it said.
The central bank hopes to lower the economy’s reliance on cash, enable cheaper and smoother international settlements, and protect people from the volatility of private cryptocurrencies, RBI officials have said in recent quarters. Based on the test results, the central bank will experiment with additional features and applications of the digital rupee in future pilots, it said.
The limited roll-out of e-rupee comes at a time when several governments across the globe are trialing digital versions of their currencies. Singapore’s monetary authority said in late October that it will test a digital version of the local dollar. The central banks of China and the Bahamas have also experimented in this field. The National Bank of Kazakhstan plans to integrate its CBDC on the BNB Chain, crypto giant Binance said earlier.
But some have expressed concerns about the unchecked proliferation of digital currencies.
Jeremy Fleming, the director of Britain’s Government Communications Headquarters, recently warned that Beijing was aiming to use a range of technologies, including the digital currency, to control markets and people. Beijing’s efforts to build a central-bank digital currency could allow it to monitor transactions for oppressive means and in the future enable it to evade international sanctions, he added.
“Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones / devices. Transactions can be both Person to Person (P2P) and Person to Merchant (P2M). Payments to merchants can be made using QR codes displayed at merchant locations. The e₹-R would offer features of physical cash like trust, safety and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks,” the Reserve Bank of India said in a press announcement.
