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RBI Expands CBDC Pilot to Include Additional Banks and Locations

On Tuesday, the Reserve Bank said that the Central Bank Digital Currency (CBDC) project is progressively expanding its reach to cover additional institutions and locations.

On November 1, 2022, the first pilot for the Digital Rupee -Wholesale Segment (e rupee-W) began. On December 1, 2022, the first pilot for the retail digital rupee (e rupee-R) was launched.

Retail digital rupee provides aspects of physical money, such as trust, safety, and finality of payment, in a digital format.

As with actual currency notes, it may be retained or used to complete transactions, according to the RBI's annual report.

In Mumbai, New Delhi, Bengaluru, and Bhubaneswar, the pilot was introduced to a closed user group (CUG) of participating consumers and merchants.

The pilot is also gradually expanding to include other cities, including as Ahmedabad, Chandigarh, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.

Four banks first participated in the pilot: State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. Subsequently, Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank joined.

“Five other banks are in the process of joining the pilot, including Punjab National Bank, Canara Bank, Federal Bank, Axis Bank, and IndusInd Bank. According to the statement, the pilot's scope is being progressively extended to cover more banks, users, and locations.

It stated that the outcomes of both pilot programmes so far have been positive and consistent with expectations.

According to the paper, the use case for the Digital Rupee -Wholesale Segment pilot is the settlement of secondary market transactions in government securities (G-secs).

The inter-bank market is anticipated to become more effective with the adoption of the Digital Rupee -Wholesale Segment.

By eliminating the requirement for infrastructure to support settlement guarantee systems or for collateral to decrease settlement risk, settlement in central bank money would lower transaction costs.

Participating in the pilot are nine banks: 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.

Settlements in e-rupee may lower transaction costs by avoiding the requirement for settlement guarantee infrastructure or for collateral to offset settlement risk. The CBDC is anticipated to increase the interbank market's efficiency.

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