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RBI Navigates Further into Digital Currency with a New CBDC Pilot

The Reserve Bank of India (RBI) initiates a wholesale CBDC pilot in the call money market, involving major banks for comprehensive testing.

Key Takeaways

  • Reserve Bank of India (RBI) launches a CBDC pilot focusing on the call money market.
  • The pilot involves major Indian banks and looks to explore the e-rupee within the wholesale segment.
  • The RBI plans to expand the testing across various use cases, including asset tokenization and repo transactions.
  • This move follows previous pilots in government securities and the retail segment by RBI.

Embarking on a new phase in exploring digital currencies, the Reserve Bank of India (RBI) has set the wheels in motion for a pilot of its wholesale central bank digital currency (CBDC) within the realm of the call money market.

Sources revealed to Money Control that the pilot has commenced and has seen some dealings already, stating: “We have started the wholesale CBDC pilot in the call money market and some deals have also taken place.”

RBI on Digital Currency

The call money market, integral to the Indian monetary system, operates as a platform where surplus funds are traded between banks and financial institutions, typically overnight or for short durations, and always at prevailing market rates.

Notably, nine banks partaking in this digital rupee pilot have been named: 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, all of which were involved in the RBI’s prior wholesale pilot for government securities in November of the preceding year. Federal Bank is a fresh addition to this list.

As per Business Standard, the next few days are set to witness the testing of additional use cases under the CBDC pilot.

One source revealed the inclusive plan stating, “The roadmap is that the entire wholesale segment should be covered like asset tokenization where securities will be tokenized, repo transactions, etc. E-rupees will move from bond to call money to repo.

Once the entire segment is covered, then a final pilot will be done for the entire wholesale segment.”

Furthermore, this initiative by the RBI is not isolated to the wholesale domain. A CBDC pilot was also initiated in the retail segment in December of the previous year.

RBI Governor Shaktikanta Das, last month, shared that the retail digital rupee pilot is operational through 13 banks across 26 cities and is being utilized by over 300,000 merchants and approximately 1.46 million users.

Concluding Thoughts

The RBI’s rigorous and multifaceted testing of the digital rupee signals a judicious and explorative approach towards the implementation of CBDCs in India’s economic framework.

The navigation through varied use-cases, spanning from government securities and retail to the call money market, indicates a comprehensive effort to discern and mitigate potential challenges in implementing digital currency on a broader scale.

The endeavor to embed the e-rupee into various financial contexts not only suggests a forthcoming paradigm shift in monetary transactions but also mirrors global trends where central banks are actively exploring and testing CBDCs.

By piloting the digital rupee within distinct financial sectors, the RBI is fortifying its understanding and operational framework of CBDCs, setting a precedent for a holistic and informed eventual rollout.

This multi-pronged pilot approach could potentially provide invaluable insights, molding the future trajectory of digital currencies within the nation.