According to the Reserve Bank of India, nine banks, namely the State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC have been identified for participation in the pilot project
The first pilot in the Digital Rupee - Wholesale segment (e₹-W) i.e., the central bank digital currency (CBDC) will commence today, the Reserve Bank of India announced on Monday, October 31, 2022. According to the RBI, nine banks, namely, the State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC have been identified for participation in the pilot project.
“The use case for this pilot is settlement of secondary market transactions in government securities. Use of e₹-W is expected to make the inter-bank market more efficient,” the RBI said in its press statement.
The RBI added that the settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk.
“Going forward, other wholesale transactions and cross-border payments will be the focus of future pilots, based on the learnings from this pilot,” it said.
Additionally, the RBI has noted that the first pilot in Digital Rupee – Retail segment (e₹-R) has been planned for launch within a month in select locations in closed user groups comprising customers and merchants. The details regarding operationalisation of e₹-R pilot shall be communicated in due course.
What Is Wholesale CBDC?
Wholesale CBDC refers to financial institutions that carry reserve deposits with a central bank. It facilitates towards improving the payments and securities settlement efficiency, while also lowering the counterparty credit and liquidity risks.
In wholesale CBDCs, in a domestic payment system, the central bank acts as a central counterparty in a cross-border setting.
What Is Retail CBDC?
Contrary to a wholesale CBDC , retail CBDC can be defined as one of the currency which has been issued to the general public. It is based on distributed ledger technology – popularly known as DLT – and has the characteristics of anonymity, traceability, and is available 24x7 and 365 days a year, along with the feasibility of an interest rate application.