Digital Rupee Enters Retail Market; Can everyone use it now? Important details you need to know

The Reserve Bank of India (RBI) is launching the first digital rupee (e₹-R) retail pilot in New Delhi, Mumbai, Bengaluru and Bhubaneswar on Thursday (1 December). Later it will be expanded to nine more cities in the initial phase. The move comes a month after RBI launched a pilot in the digital rupee wholesale segment on November 1.

What is a retail digital rupee? It is India’s first central bank digital currency (CBDC), or a digital or virtual currency that can be used for retail purchases. Like paper money, it is also issued by the Reserve Bank of India. “The e₹-R would take the form of a digital token representing legal tender,” RBI said on Tuesday.

The digital rupee is India’s first central bank digital currency.

Can you use digital rupee now? Not everyone will be able to use the digital rupee from now on. It is in pilot mode. RBI has announced that the pilot launch would cover select locations in a closed user group (CUG) that includes participating customers and dealers. The scope of the pilot can be gradually expanded to include more users.

Is an app required for Digital Rupee? Users can transact with the digital rupee or e₹-R through a digital wallet offered by participating banks and stored on mobile phones/devices. The digital rupee allows users to transfer payment to other users (person-to-person) as well as pay for purchases in stores (person-to-merchant).

The digital retail rupee would be distributed through intermediaries i.e. banks.

Which banks distribute digital rupees? According to the RBI statement, eight banks have been identified for phased participation in this pilot project. The first phase will start with four banks – State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank – in four cities across the country. Four other banks – Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank – will subsequently join this pilot.

What will be the denominations of the digital rupee? It would be issued in the same denominations that paper money and coins are currently issued.

Which cities were covered in the pilot launch? The pilot would initially cover four cities – Mumbai, New Delhi, Bengaluru and Bhubaneswar – and later expand to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. The scope of the pilot can be incrementally expanded as needed to include additional banks, users and locations.

Is digital rupee the same as cryptocurrency? no The digital rupee is a CBDC or digital or virtual currency. It differs from private virtual currencies or cryptocurrencies, including Bitcoin, Ethereum, etc., which have mushroomed over the last decade. Private virtual currencies do not represent any debt or liability of any person as there is no issuer.

Is digital rupee the same as digital money? no With digital money, the liability lies with the banks. But in the case of the digital rupee, liability rests with the RBI.

Is the digital rupee safe? Yes. The digital rupee would offer characteristics of physical cash such as trust, security and settlement finality.

Will Digital Rupee Earn Interest in Wallet? no Like cash, it does not bear interest and can be converted into other forms of money such as deposits with banks.

Why is there a pilot launch? The pilot will test the robustness of the entire process of real-time digital rupee creation, distribution and consumption in retail. Based on the findings from this pilot project, various functions and applications of the e₹-R token and architecture will be tested in future pilot projects.

Around the world, more than 60 central banks have expressed interest in CBDCs, with some implementations already being piloted in both the retail and wholesale categories, and many others are researching, testing and/or rolling out their own CBDC framework.

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