A month after the Reserve Bank of India (RBI) launched the Digital Rupee for wholesale (e₹-W), the digital rupee for retail — denoted by e₹-R — will be rolled out as part of a pilot from December 1. The newly launched e₹-R and the e₹-W are two variants of India's own central bank digital currency (CBDC).
The RBI announced the launch of the first pilot for retail digital rupee (e₹-R) on Tuesday.
How does the model differ from the wholesale rupee?
The model applicable for implementation of the retail rupee is different from the wholesale rupee used by banks for government security transactions, according to Jyoti Prakash Gadia, Managing Director at Resurgent India — a SEBI-registered category 1 merchant bank.
Gadia said in a statement that the token-based mechanism for retail is more appropriate for the common retail customers including individual customer transactions with select merchants and also for transactions between one individual with another individual, initially to be used within a select closed group.
Retail digital rupee to be launched in four cities
Those in Mumbai, New Delhi, Bengaluru, and Bhubaneswar will be able to transact with e₹-R via digital wallets offered by participating banks and stored on mobile phones starting December 1. This will be later expanded to nine more cities.
“The pilot would initially cover four cities, namely, Mumbai, New Delhi, Bengaluru, and Bhubaneswar and later extend to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla," according to the central bank.
The four cities were chosen for the pilot launch due to the size of customers well-versed in digital transactions usage in these cities, said Gadia. The project will be rolled out further based on the experience from the pilot launch. "There will be further improvement and sophistication expected with wider coverage by leveraging the strong digital infrastructure of the nation by RBI," Gadia added.
Four banks to start digital rupee pilot
The first phase will begin with four banks, namely State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank in four cities across the country. A total of eight banks have been identified for phase-wise participation in this pilot, with Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank joining in later.
Jaya Vaidhyanathan, the CEO of fintech platform BCT Digital, said, "The Reserve Bank of India’s CBDC aims to fulfil the promise of affordable, safer, and easier payments for all. Since it provides a regulated alternative to cryptocurrencies in the market, the CBDC would lead to more robust and reliable payments, lowering the dependency on cash. The underpinning technology would make transaction costs low. Being interoperable with other payment systems, it will complement existing techniques like UPI, thus completing the mobile payments ecosystem."
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