Digital currency named 'e-Rupee' launched by RBI
The retail pilot of the Reserve Bank of India's (RBI) digital currency has been started on December 1, 2022. The RBI's central bank digital currency (CBDC) is an electronic form of sovereign currency called Digital rupee or e-Rupee.
Central bank in India, Reserve Bank of India had already issued a notification previous month about the retail pilot launch of RBI's digital rupee.
Retail e-Rupee:
Retail digital rupee is a direct liability of the central bank which provides access to safe money for payment and settlement. The Reserve Bank of India simply put that retail CBDC is an electronic version of cash primarily meant for retail transactions.
Design of the retail digital rupee:
- The concept note was released by the Reserve Bank of India on October 7, 2022 to propose a token-based tiered architecture model for the retail digital rupee.
- A token-based CBDC is same as banknotes which mean whoever holds it is presumed to own it.
- In a token-based CBDC, the person getting a token will verify that his ownership of the token is genuine.
- Token-based CBDC is considered as a preferred mode for CBDC-R as it would be closer to physical cash.
Who will issue and manage the retail digital rupee?
- As per the concept note, the retail digital rupee is intended to be distributed through the two-tier model.
- The Reserve Bank of India is authorized itself to issue and redeem e₹-R.
- The distribution and payment services of e₹-R will be assigned to the banks.
- The issuing and distribution model is same as the current physical currency management system wherein banks do activities like distribution of notes to the public, account-keeping etc.
Participating banks and cities in the retail digital rupee pilot programme:
Banks: Eight banks have been named for phase-wise participation in the retail pilot of the digital rupee in four cities across the country. In the first phase, four banks including State Bank of India, ICICI Bank, YES Bank, and IDFC First Bank have been authorized to take part in the pilot launch.
Four more banks — Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank will join this pilot subsequently.
Cities: The pilot is initially covering four cities named Mumbai, New Delhi, Bengaluru, and Bhubaneswar.
It will later cover to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.
The Reserve Bank of India has also notified that the scope of the pilot may be expanded gradually to include more banks, users, and locations as needed.
How to use e₹-R?
The e₹-R will be issued in the same denominations that paper currency and coins are currently issued.
Users could transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones or devices.
Limitation:
Do note that the retail digital rupee is not liable to earn any interest and can be converted to other forms of money, like deposits with banks.
Question & Answer:
Q1. What is retail digital rupee or e-Rupee?
Ans. Retail digital rupee is a direct liability of the central bank which provides access to safe money for payment and settlement
Q2. Who will issue and manage the retail rupee or e-Rupee?
Ans. RBI will issue it and authorized banks will manage it
Q3. From which date the retail pilot of the Reserve Bank of India's (RBI) digital currency is gone live?
Ans. 1st December, 2022
Q4. Which are the cities covered for the retail pilot of the Reserve Bank of India's (RBI) digital currency in initial phase?
Ans. Mumbai, New Delhi, Bengaluru, and Bhubaneswar
Q5. How many banks are participating in the retail pilot of digital currency for its first phase?
Ans. Four banks (State Bank of India, ICICI Bank, YES Bank, and IDFC First Bank)
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