RBI in final stages of retail CBDC pilot rollout

The Reserve Bank of India (RBI) is in the final stages of the rollout of the retail central bank-backed digital currency (CBDC) that will be interoperable with the present forms of payment systems, people aware of the developments said.

Officials indicated that the platform for CBDC is being hosted by the National Payments Corporation of India and will be similar to the current UPI platform. The central bank wants each bank to test the retail CBDC with 10,000 to 50,000 users for the pilot project.

State Bank of India, Bank of Baroda, Union Bank of India, ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Yes Bank and IDFC First Bank are participating in the trial project, which will be later extended to the entire banking system.

“Just like we have a common library for UPI, the technology for CBDC is similar to that and it is being hosted by NPCI, it will be interoperable with the current payment platforms,” a person involved in the pilot said. “The e-rupee will be stored in a wallet, the denominations will be available as per the customer’s request, just like you request cash from an ATM. Banks are launching this only in select cities.”
The first set of transactions will be between customers and merchants for which banks have tied up with last-mile fintech service providers like PayNearby and Bankit.

Officials in the know said that while initially retail CBDC will be offered as a standalone product, later it will be integrated with present mobile/internet banking services. For the rollout, select customers and merchants will be asked to download an app/wallet that will hold the e-rupee. Customers have to request specific denomination e-rupee from their respective banks which will then be transferred to their CBDC wallet.

While RBI hasn’t dictated a number, the informal dialogue suggests they want retail CBDC to get tested with at least 10,000-50,000 customers per bank.

“Banks are in the process of onboarding existing customers and merchants on the app, the transaction railroads are pretty similar to UPI,” said another official.

While the regulator had initially started the pilot with SBI, ICICI, Yes and IDFC, it later invited HDFC Bank, BoB, UBI and Kotak about three months ago to join the cohort.

Last month, the RBI became one of the first major central banks in the world to start a pilot project with its own virtual currency, using the wholesale digital rupee on a trial basis for settlement of transactions in government securities.

The RBI had earlier said the first pilot in the Digital Rupee-Retail segment (also referred to as e₹-R) was planned for launch within a month in select locations in closed user groups comprising customers and merchants.

In its concept note, the RBI said the CBDC was aimed at complementing, rather than replacing, current forms of money. It seeks to provide an additional payment avenue to users—and not replace the existing payment systems.

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