First Pilot For Wholesale Segment To Begin on Tuesday, Says RBI

The Reserve Bank of India (RBI) on Monday said the first pilot in the digital rupee– wholesale segment (e₹-W) will commence on Tuesday (November 1). It also said the first pilot for the retail segment (e₹-R) is planned for launch within a month.

The announcement comes after the central bank earlier this month said that it will soon commence pilot launch of the digital rupee (e₹) for specific use cases.

“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. 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,” the RBI said on Monday in a statement.

It added that 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 — have been identified for participation in the pilot.

The RBI also said, “The first pilot in Digital Rupee- Retail segment (e₹-R) is 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.”

Earlier this month, the RBI had released a concept note on Central Bank Digital Currency (CBDC) to create awareness about CBDCs in general and the planned features of the digital rupee in particular. It said the e-rupee will provide an additional option to the currently available forms of money. It is substantially not different from banknotes, but being digital it is likely to be easier, faster and cheaper. It also has all the transactional benefits of other forms of digital money.

The RBI it broadly defines CBDC as the legal tender issued by a central bank in a digital form. It is akin to sovereign paper currency but takes a different form, exchangeable at par with the existing currency and shall be accepted as a medium of payment, legal tender, and a safe store of value. CBDCs would appear as a liability on a central bank’s balance sheet.

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