Digital Rupee first pilot on November 1: Participating banks, use cases and more – Times of India

The Reserve Bank of India (RBI) has announced that it will commence the pilot of Digital Rupee for specific use cases starting November 1. The first pilot will be in the Digital Rupee – Wholesale segment (e₹-W) and will be used to make transactions in government securities.
“The use case for this pilot is settlement of secondary market transactions in government securities. Use of e₹-W is expected to make the inter-bank market more efficient. Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk,” RBI said in a statement. It further added that the first pilot in the Digital Rupee – Retail segment is planned for launch within a month in select locations in closed user groups comprising customers and merchants.
What is Digital Rupee
A Digital Rupee, to an extent, mimics the characteristics of bank notes and coins. It can be used for transactions legally, you don’t need a bank account and it can be stored in a digital wallet.
Benefits of Digital Rupee
Earlier this month, RBI introduced a Concept Note to create awareness about Central Bank Digital Currency (CBDC), its objectives, choices that people will have, benefits, and risks of issuing a CBDC in India. CBDC will be available as another option in the existing payment systems. RBI said in its Concept Note that Digital Rupee will “bolster India’s digital economy, enhance financial inclusion, and make the monetary and payment systems more efficient.”
With CBDC, the government will not have to bear the cost of printing and management of physical cash. Digital Rupee will also support innovation in payments.
Risks involved in Digital Rupee
Since CBDC and transactions will involve some kind of digital technology, there is a risk of hacking and users’ privacy.
Digital Rupee use cases
The apex bank announced that wholesale transactions as well as cross-border payments will be the focus of future pilots and they will be based on the learnings from the current phase.
“The first pilot in the Digital Rupee – Retail segment is planned for launch within a month in select locations in closed user groups comprising customers and merchants,” the company said. The details regarding the operationalisation of this pilot will be announced at a later date.
Participating banks in Digital Rupee pilot
As per the RBI, a total of nine banks: State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC have been identified for participation in the pilot.

How CBDC is different from UPI
Currently, the concept of digital payments aligns with transactions made through UPI as well as NEFT and RTGS. In these modes of payments, there is an intermediary bank through which the payments are verified and facilitated. A CBDC will be a liability of the Reserve Bank, and not of a commercial bank. This means that all the transactions will be made through the central bank.
How CBDC is different from cryptocurrency
Cryptocurrency is ‘private’ in nature, it is not regulated by any country, any bank or the developers and it is highly volatile, which means its value can change quickly on the basis of demand (interest in the market in buying them) and supply (how much is available to buy).
CBDC can be regulated and controlled by the central bank. Furthermore, there is no need to mine it, therefore, there are no environment-related concerns associated with Digital Rupee.