RBI launches pilot project of digital rupee for wholesale market

Finance Minister Nirmala Sitharaman had announced the introduction of digital currency in her budget speech last February. Now from Tuesday, November 1, India’s first Central Bank Digital Currency or Digital Rupee pilot project has started. The Reserve Bank of India on Tuesday launched a pilot project of the digital rupee targeting the wholesale market. Apart from this, RBI may also launch the first pilot project of Digital Rupee for the retail segment this month, though the project is planned to be launched only in select locations.

partnership with these banks

RBI says that nine banks have been identified for participation in the pilot project of the wholesale segment. These include State Bank of India, Bank of Baroda, Union Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, HSBC Bank. Many countries are interested in digital currency. However, only a few countries have managed to move past the experimental stage of developing their own digital currency.

What is Digital Rupee?

The Reserve Bank of India states that a CBDC is a legal currency issued in a digital form by a central bank. According to the RBI website, “It is similar to paper currency and can be interchanged with paper currency. Only its form is different. Simply put, Digital Currency (CBDC) or Digital Rupee are currency notes issued in digital form by RBI. These currencies, which are in electronic form, can be used for contactless transactions. There will be two types of digital currency in India. One is retail CBDC (CBDC-R) and the other is wholesale CBDC (CBDC-W). Retail CBDCs will be available for all retail use, while wholesale CBDCs will be available to select financial institutions.

Benefits of digital currencies

There will be many benefits of using CBDC. Minister of State for Finance Pankaj Choudhary had said in the Lok Sabha last year, “Digital rupees will have many benefits. This will not only reduce dependence on cash, but CBDCs will pave the way for more robust, efficient, reliable, regulated and legitimate payment options.” There will be little or no need to carry. People will be able to keep digital currency in their mobile wallet. Also this digital currency can be easily converted into bank money and cash.

Transactions to be monitored more

In addition to reducing transaction costs, this digital currency will give the government access to all transactions in authorized networks. In this way, there will be more control over the flow of rupees in and out of the country. Along with this, the problem of fake notes will also get rid of. The cost of printing paper notes will be saved. Once issued, digital currencies will last forever and never go bad. CBDC is more secure than traditional digital transactions, as it is based on a blockchain which is very difficult to break. Blockchain technology accelerates payments. The use of CBDC can further transform the cashless economy. The use of CBDC will promote cashless payments and bring about a positive change in the banking landscape.