RBI may introduce CBDC in call money market soon

The Reserve Bank is planning to extend wholesale Central Bank Digital Currency (CBDC) for transactions for interbank borrowing or call money market, sources said on Tuesday.

The pilot in the wholesale segment, known as the Digital Rupee -Wholesale (e₹-W), was launched on November 1, 2022, with the use case being limited to the settlement of secondary market transactions in government securities.

"RBI is now planning to go into the interbank borrowing market.

"The purpose of wholesale CBDC has been to try out different technologies...experimenting on technology is relatively easier for the wholesale pilot because participants are related," according to sources.

The introduction of CBDC was announced in the Union Budget 2022-23 by Finance Minister Nirmala Sitharaman and necessary amendments to the relevant section of the RBI Act, 1934, were made with the passage of the Finance Bill 2022.

The RBI picked up nine banks -- 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 -- for its pilot project for wholesale CBDC.

Besides, the central bank has already rolled out a pilot in the retail version of the CBDC (e₹-R) on December 1, 2022.

The e₹-R is in the form of a digital token that represents legal tender.

It is being issued in the same denominations as the paper currency and coins.

It is being distributed through financial intermediaries like banks.

Users can transact with e₹- R through a digital wallet offered by the participating banks.

About RuPay, sources said no instructions have been given to promote this.

However, they said, this has to be popularised by making it attractive.

Asked when the CBDC pilot ends, sources said there is no deadline as of now and 10.83 crore transactions amounting to Rs 24,000 crore were witnessed in August.

Meanwhile, the RBI will showcase various digital initiatives in the financial sector at the exhibition pavilion during the G20 Summit later this week.

These include Public Tech Platform (PTP) for Frictionless Credit, CBDC, UPI One World, RuPay On-The-Go and Bharat Bill Payment System.

There is a lot of interest being shown by G-20 member nations, especially on Unified Payments Interface (UPI) and RuPay, sources said.

At Public Tech Platform, visitors can experience an interactive demonstration of the entire process -- from onboarding to sanction and disbursement of the KCC and dairy loans in an entirely digital manner in a few minutes, revolutionising rural credit.

Sources said going forward this platform can be used for the distribution of small ticket loans like MSME, personal loans etc.

Besides, the central bank will showcase an informational video on the RBI's digital rupee and its journey, and there will be live digital rupee transactions demonstrated by select banks, which are participating in the pilot.

UPI One World would enable visitors to onboard UPI without having a bank account in India.

RuPay On-The-Go would allow customers to carry out contactless payment transactions through accessories they wear (watch, ring) or use (key chain) every day and highlight the adaptability of the domestic card scheme-associated products at par with such global products.

BBPS (Bharat Bill Payment System) cross-border bill payment will highlight the adaptability of the BBPS platform to integrate with fintechs and conventional financial players to facilitate domestic as well as cross-border payment transactions.