Moneycontrol

Budget 2023Budget 2023

PARTNERS

  • Tata AIA Life Insurance
  • Hafele
  • Motilal Oswal
Register Now : Nifty Banker 3.0 | India's First Retail Index Traders Online Conference.
Budget 2023
Budget 2023
you are here: HomeNewsBusiness

MC Explains | What is the RBI pilot programme for a retail digital rupee?

The RBI and commercial banks will form a closed user group comprising participating customers and merchants. The banks will distribute the digital rupee to the user group in the form of tokens in the same denominations that paper currency and coins are currently issued

December 01, 2022 / 07:39 AM IST
Customers selected by banks for the pilot can ask banks to debit their bank account and transfer certain denominations of currency to their CBDC wallet.

Customers selected by banks for the pilot can ask banks to debit their bank account and transfer certain denominations of currency to their CBDC wallet.

The Reserve Bank of India (RBI) announced that it is starting the first pilot for its retail digital rupee on December 1, marking the first step towards the adoption of a retail digital rupee or retail central bank digital currency (retail CBDC). This explainer helps understand the concept of a retail CBDC and the RBI’s pilot project.

What do we mean by retail CBDC?

The central bank issues two kinds of money. The first is wholesale money used by commercial banks for interbank transactions. Wholesale money is popularly known as reserves. The second is retail money which is used by the public for transactions. Retail money as we all know is popularly called cash. Both wholesale and retail money are liabilities of the central bank and thus are the most trusted form of currency.

The graph below explains these ideas in a better way. We see money having three attributes: central bank-issued money, universally accessible money and electronic money. There are reserves issued by central banks and are already electronically available. Thus, the transition of reserves to wholesale CBDC is much easier. The RBI had announced a pilot for wholesale CBDC last month for settlement of secondary market transactions in government securities.