It is akin to sovereign paper currency but takes a different form, exchangeable at par with the existing currency and shall be accepted as a medium of payment, legal tender and a safe store of value. RBI said the concept note “broadly defines CBDC as the legal tender issued by a central bank in a digital form. Here is everything you need to know about the digital currency: What is it? In October, RBI issued a concept note on central bank digital currency (CBDC), listing the risks and benefits of introducing these currencies. The first pilot in the Digital Rupee-Retail segment (e-R) is planned for launch within a month in select locations in closed user groups comprising customers and merchants, the central bank added.

Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from this pilot,' said the RBI. ' 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.

“Use of e-W is expected to make the inter-bank market more efficient.” In the pilot phase, RBI will issue the digital currency to each bank’s CBDC account at regular intervals and on demand, the bonds will settle in the SGL account with day end and pre-trade checks to ensure end-to-end operationalisation. “The use case for this pilot is settlement of secondary market transactions in government securities,” the RBI said in a statement. The nine banks have already opened accounts with RBI to transact in CBDCs, and when a transaction happens, money will be transferred instantaneously. State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank and Kotak Mahindra Bank are among the nine banks that have been shortlisted in the wholesale e-rupee (e-W) pilot project. The pilot project for a retail version of the digital rupee will be launched in a month. NEW DELHI: The Reserve Bank of India (RBI) on Tuesday rolled out a pilot project with its own virtual currency when the wholesale digital rupee is used on a trial basis from today - initially for settlement of transactions in government securities.

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