Union Bank executes over 25% secondary market G-sec trades using CBDC in three days: Official

The Reserve Bank of India said that the settlement in central bank money would reduce transaction costs.

Government-run Union Bank of India has executed more than 25 percent of the overall government securities trade in the secondary market in the last three days under the wholesale pilot announced by the central bank for the rollout of digital currency, an official aware of the development told Moneycontrol. The official declined to be named.

"We are trading bonds over Rs 70 crore on a daily basis since the start of the pilot," the Union Bank of India official said.

According to the NDS-OM CBDS trades data on the CCIL website, bonds worth Rs 200 crore have been settled on the third day via wholesale CBDC. And since the inception of this pilot, trades bonds worth Rs 755 crore have been settled.

The central bank on October 31 had identified 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 to participate in the pilot project in this segment.

"The process, software and technology have so far been seamless and we are conducting trades in a very smooth manner," another person trading in government securities in CBDC said.

The Reserve Bank of India (RBI) in a release had said that the 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.

Other wholesale transactions and cross-border payments will be the focus of future pilots, based on learnings from this pilot, the RBI added.

RBI Governor Shaktikanta Das on November 2, during an annual banking conference organised jointly by the Federation of Indian Chambers of Commerce and Industry and the Indian Banks' Association, said that wholesale digital currency is a major transformation in the way business is done.

"I think, in that sense also, it's going to be a major transformation of the way business is done and the way transactions are conducted. And the RBI is among the few central banks in the world which have taken this initiative," Das said.

Das also added that they do not want to rush the pilot of retail CBDC. "We proposed to commence the pilot project for retail shortly," he said.

"Our endeavour is to try and launch CBDC in a full-fledged manner in the near future. In fact, incidentally, the retail part of CBDC trail will be launched later during this month and we will announce the date separately. But I don't want to give any target date when CBDC will be launched in a full-fledged manner because this is something where we have to proceed very carefully," the RBI governor said.