RBI Set To Initiate CBDC Pilot In Call Money Market Possibly By October

The Executive Director of the Reserve Bank of India (RBI), Ajay Kumar Choudhary, announced on Sunday that the central bank is planning to initiate a pilot programme for the Central Bank Digital Currency (CBDC) in the interbank borrowing or call money market, with a target launch date of October.

The pilot project for the wholesale CBDC, also known as the Digital Rupee-Wholesale (e-W), was originally introduced in November of the previous year. Initially, it was limited to facilitating the settlement of secondary market transactions in government securities. Subsequently, a retail CBDC pilot was initiated on 1 December.

Choudhary stated that the RBI intends to introduce the wholesale CBDC in the call money market either later this month or the following month. This announcement aligns with recent reports from a media house, which suggested that the central bank was planning to extend the use of wholesale CBDC to the call money market to explore different market dynamics and technologies.

The Union Finance Minister, Nirmala Sitharaman, had announced the introduction of CBDC in the Union Budget for 2022-23. To support this initiative, necessary amendments were made to the relevant sections of the RBI Act of 1934 through the passage of the Finance Bill in 2022.

In 2022, the RBI introduced the digital Rupee, India's own CBDC, as an electronic form of sovereign currency. Two versions were proposed: CBDC-Wholesale (CBDC-W), with restricted access for select financial institutions, and CBDC-Retail (CBDC-R), which can be used by private sector entities, non-financial consumers, and businesses.

The central bank selected nine banks for its wholesale CBDC pilot project, including State Bank of India (SBI), Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, YES Bank, IDFC First Bank, and HSBC. Users of the e-Rupee can conduct transactions using a digital wallet offered by these participating banks.

The retail e-Rupee was launched in various denominations, including 50 paise, 1, 2, 5, 10, 20, 50, 100, 200, 500, and 200. In contrast, the wholesale e-Rupee does not specify denominations, according to the central bank's annual report for 2022-23.

During the recently concluded G20 Leaders' Summit, the RBI showcased several digital initiatives in the financial sector, including the Public Tech Platform (PTP) for Frictionless Credit, CBDC, UPI One World, RuPay On-The-Go, and the Bharat Bill Payment System.