The first pilot of the Digital Rupee, Wholesale (e₹-W) segment will commence on November 1, 2022, the Reserve Bank of India (RBI) announced in a circular.

“The use case for this pilot project is the settlement of secondary market transactions in government securities. The use of e₹-W should make the interbank market more efficient. Settlement in central bank money would reduce transaction costs by obviating the need for settlement collateral infrastructure or collateral to mitigate settlement risk,” the circular states.

“Going forward, other wholesale transactions and cross-border payments will be the focus of future pilots, based on lessons learned from this pilot,” he added.

Nine banks, namely 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 to participate in the pilot project.

The first pilot of the Digital Rupee – Retail (e₹-R) segment is expected to be rolled out within a month in selected locations in closed user groups including customers and merchants. Details regarding the operationalization of the e₹-R driver will be communicated in due course.

The RBI also released a concept note on the Central Bank Digital Currency (CBDC) for India on Monday. The purpose of publishing this concept note is to raise awareness of CBDCs in general and the planned features of the digital rupee (e₹) in particular.

It explains the objectives, choices, benefits, and risks of issuing a CBDC in India. The note also aims to explain the Reserve Bank’s approach to the introduction of the CBDC.

The concept note also addresses key considerations such as technology and design choices, possible uses of the digital rupee, issuance mechanisms, and more. It examines the implications of the introduction of the CBDC on the banking system, monetary policy, financial stability and analyzes privacy issues.