Digital Rupee Enters Retail Market; Can Everyone Use It Now? Key Details You Must Know

The Reserve Bank of India (RBI) is on Thursday (December 1) launching the first pilot for retail digital rupee (e₹-R) in New Delhi, Mumbai, Bengaluru and Bhubaneswar. It will later expand the same to nine more cities in the initial phase. The move follows a month after the RBI had started a pilot in the digital rupee – wholesale segment on November 1.

What Is Retail Digital Rupee? It is India’s first central bank digital currency (CBDC), or a digital or virtual currency, that can be used for retail purchases. Like paper currency, it is also issued by the Reserve Bank of India. “The e₹-R would be in the form of a digital token that represents legal tender,” the RBI said on Tuesday.

Can You Use Digital Rupee Now? Not everybody will be able to use the digital rupee as of now. It is in pilot mode. The RBI has said the pilot launch would cover select locations in closed user group (CUG) comprising participating customers and merchants. The scope of the pilot may be expanded gradually to include more users.

Will Any App Be Required For Digital Rupee? Users will be able to transact with the digital rupee, or e₹-R, through a digital wallet offered by the participating banks and stored on mobile phones/ devices. Through the digital rupee, users will be able to transfer the payment to other users (person-to-person) as well as pay at stores for shopping (person-to-merchant).

The retail digital rupee would be distributed through intermediaries, i.e., banks.

Which Banks Will Distribute Digital Rupee? Eight banks have been identified for phase-wise participation in this pilot, according to the RBI statement. The first phase will begin with four banks — State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank — in four cities across the country. Four more banks — Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank — will join this pilot subsequently.

What Will Be The Denominations Of Digital Rupee? It would be issued in the same denominations that paper currency and coins are currently issued.

Which Cities Have Been Covered In Pilot Launch? the pilot would initially cover four cities — Mumbai, New Delhi, Bengaluru and Bhubaneswar — and later extend to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. The scope of the pilot may be expanded gradually to include more banks, users and locations as needed.

Is Digital Rupee Same As Cryptocurrency? No. The digital rupee is a CBDC, or a digital or virtual currency. It is different from private virtual currencies or cryptocurrencies, including Bitcoin, Ethereum, etc, that have mushroomed in the last decade. Private virtual currencies do not represent any person’s debt or liabilities as there is no issuer.

Is Digital Rupee Same As Digital Money? No. In digital money, the liability is on banks. But, in the case of digital rupee, the liability is on the RBI.

Is Digital Rupee Safe? Yes. The digital rupee would offer features of physical cash like trust, safety and settlement finality.

Will Digital Rupee Earn Interest In Wallet? No. 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.

Why Is There A Pilot Launch? The pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real time. Different features and applications of the e₹-R token and architecture will be tested in future pilots, based on the learnings from this pilot.

Across the globe, more than 60 central banks have expressed interest in CBDCs with a few implementations already under pilot across both retail and wholesale categories and many others are researching, testing, and/or launching their own CBDC framework.

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