India’s Digital Rupee coming on Dec 1, here is how it would work

30 November 2022

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New Delhi, Nov 29: The Reserve Bank of India (RBI) on Tuesday announced the launch of the first pilot for retail digital Rupee or e-rupee or eâ‚¹-R on December 1. To start with, the RBI has partnered with four banks including State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank in Mumbai, New Delhi, Bengaluru, and Bhubaneswar. Initially, RBI said, the pilot would cover only the closed user group (CUG) comprising participating customers and merchants.

What is digital Rupee or e-Rupee?

As the RBI explained, the e-Rupee is a form of digital token that represents legal tender. Unlike cryptocurrencies, the digital Rupee is issued in the same denominations as paper currency and coins.

How will digital Rupee work?

The RBI explained that digital Rupee or e-Rupee will be distributed through intermediaries like banks to customers and merchants. Users will be able to transact with e-Rupee through a digital wallet offered by the eligible banks and stored on mobile phones or devices.

The central bank also confirmed that the transaction in digital Rupee can happen between Person to Person (P2P) and Person to Merchant (P2M). Users will be able to make payments through e-Rupee using QR codes displayed at merchant locations, just like online transactions are done. “The eâ‚¹-R would offer features of physical cash like trust, safety and settlement finality. 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,” the official RBI release stated.

RBI also revealed that 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 eâ‚¹-R token and architecture will be tested in future pilots, based on the learning from this pilot.”

List of eligible banks and cities?

The central bank revealed that the rollout of digital Rupee will happen in a phased manner. To start with, in the first phase the pilot will begin with four banks — State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank across only four cities. These cities include — Mumbai, New Delhi, Bengaluru, and Bhubaneswar. Going forward, RBI revealed, four more banks will join the pilot including — Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank.

Later, the facility will be extended across many more Indian cities including Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla. Eventually, the facility will roll out to other parts of the country. The timeline of the official rollout hasn’t been revealed yet. “The scope of pilot may be expanded gradually to include more banks, users, and locations as needed,” RBI said.

The RBI has been talking about introducing the digital Rupee for a long time and starting Dec 1 some users will be able to use e-Rupee to make transactions. With the digital Rupee, the broader wish of the central bank is to execute a full-fledged launch of the CBDC (central bank digital currency) in the near future.