RBI Annual Report: Central Bank To Expand CBDC Pilots In FY24

The Reserve Bank of India (RBI) is looking to expand the ongoing pilots of the Central Bank Digital Currency (CBDC) – digital rupee (e₹) – for retail as well as wholesale segments during the financial year 2023-24 (FY24).

“During 2023-24, the Reserve Bank aims at expanding the ongoing pilots in CBDC-Retail and CBDC-Wholesale by incorporating various use cases and features,” the RBI said in its annual report. 

The central bank added that the CBDC-Retail (e₹-R) pilot will also be expanded to more locations and include more banks in FY24.

The RBI began the pilot of CBDC-Wholesale (e₹-W) on November 1, while that for e₹-R was started in December.

In the annual report, the central bank said that the value of e₹-W in circulation stood at INR 10.39 Cr as of March 31, 2023, while the number was at INR 5.7 Cr for e₹-R.

As per the RBI, the wholesale pilot has one use case right now – settlement of secondary market transactions in government securities (G-secs). 

“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,” the central bank said. It added that currently, nine banks are participating in the pilot for the wholesale segment.

On the other hand, CBDC for the retail segment is being positioned as an alternative to physical cash and other means of digital transactions (UPI, for example). “It can be held or used to carry out transactions, similar to the manner in which currency notes can be used in physical form,” the RBI reiterated.

The retail pilot was launched in closed user groups across four cities in the beginning, with 10 more cities being added as part of the pilot. While only four banks were participating in the retail CBDC in the beginning, five more banks joined the pilot in the months after the launch.

“The results of both the pilots so far have been satisfactory and in line with expectations,” the RBI said.

84 Digital Banking Units Operational: RBI

One of the many government-backed fintech initiatives is the digital banking units (DBUs), announced by the Union Minister of Finance Nirmala Sitharaman during her Budget speech for 2022-23. 

Sitharaman announced that the government will set up 75 DBUs across the country, which were dedicated to the nation by Prime Minister Narendra Modi in October 2022. 

According to the RBI, there are 84 DBUs operational across the country right now.

“Banks are free to set up DBUs in accordance with regulatory guidance and policy,” it said in the annual report.

Though the RBI has provided a standard template of what a digital banking unit should look like, banks are free to offer digital products and services on top of the minimum products and services prescribed by the central bank.