On November 1st, the Reserve Bank of India will launch the digital rupee for the wholesale market as part of its first pilot test program to evaluate and enhance the functionality of the currency. Within a month, the central bank will begin a similar test for the retail sector in exclusive user groups of consumers and business owners, the RBI said on Monday.
The pilot will examine how secondary market government securities transactions are settled for the wholesale market. The pilot will involve nine banks, including the State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, Kotak Mahindra Bank, ICICI Bank, Yes Bank, IDFC First Bank, and HSBC.
“Use of e-W (digital rupee) is anticipated to increase the efficiency of the interbank market. By eliminating the need for infrastructure to support settlement guarantee systems or for collateral to reduce settlement risk, settlement in central bank money would lower transaction costs. Based on the lessons learned from this pilot, future pilots will concentrate on other wholesale transactions and cross-border payments, the RBI said in a press release.