RBI Set To Launch Retail CBDC Soon

The Reserve Bank of India (RBI) is reportedly in the final stages of rolling out the retail version of the Central Bank Digital Currency (CBDC), the digital rupee. The retail CBDC will be interoperable with the present forms of payment systems.

On November 1, the RBI launched the wholesale version of the CBDC. The launch day saw 48 transactions worth INR 275 Cr using CBDC.

ET cited officials stating that the National Payments Corporation of India (NPCI) is hosting the platform for CBDC and the said platform will be similar to the UPI platform.

Eight banks (SBI, Bank of Baroda, Union Bank of India, HDFC, ICICI, Kotak Mahindra, Yes Bank and IDFC First) are participating in the pilot for retail CBDC, with plans to expand the system to the entire banking system eventually. According to the officials, the RBI wants each bank to test retail CBDC with 10,000-50,000 users for the pilot.

Banks have roped in last-mile fintech service providers such as PayNearby and Bankit to enable the first set of transactions between customers and merchants using CBDC.

Initially, the retail CBDC will be offered as a standalone service. However, the RBI has plans to integrate the retail digital rupee with the current payment systems.

During the rollout, customers and merchants will be asked to download a wallet that will hold the digital rupee. Customers can then request specific denominations from their banks which will be transferred to their wallets.

According to the ET report, the banks are currently onboarding customers and merchants on the CBDC app and the transaction railroads are similar to UPI.

Last month, the RBI issued a concept note for the digital rupee, days before launching the wholesale digital rupee.

There were several motivations for the federal bank to launch the CBDC in India, becoming one of the first few reserve banks in the world to have introduced a digital currency.

The RBI has been positioning the digital rupee as a counter to cryptocurrencies in India. 

Earlier this year, Deputy Governor T Rabi Sankar said that the CBDC could kill the reason for cryptocurrencies to exist in India. 

“We believe that CBDCs would be able to kill whatever little case there could be for private cryptocurrencies. Any tool that can be used for good can also be put to undesirable uses. Technology, at the end of the day, is a tool,” Sankar said.

According to the RBI, the CBDC will help reduce operational costs involved in physical cash management, foster financial inclusion and bring resilience, efficiency and innovation to the payments system, among others.

The digital rupee is also set to play an important role in boosting innovation in cross-border payments by reducing costs and improving efficiency. 

105 countries are working on the CBDC, according to the think tank The Atlantic Council. Of the 105, 11 countries have launched nationwide CBDCs, while 15 others including India and China have launched pilot projects.