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India’s central bank to launch retail CBDC pilot in December

Digital rupee currency, CBDC currency futuristic concept

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The Reserve Bank of India (RBI) plans to launch a retail central bank digital currency (CBDC) pilot in December following the success of the wholesale CBDC pilot, reports the Economic Times of India.

The Reserve Bank of India is gearing up to introduce CBDC in its final phase, and the ‘digital rupee’ will be interoperable with several payment platforms available in the country. Several commercial banks are participating in the project with the RBI, and each financial institution is testing CBDC with at least 10,000 to 50,000 of its customers.

Participating banks include State Bank of India, Bank of Baroda, ICICI Bank, HDFC Bank, Yes Bank, Kotak Mahindra Bank and IDFC First Bank. RBI notes that this number will increase to cover more financial institutions in the country.

It is unclear whether distributed ledger technology (DLT) will be used for the CBDC, but the central bank says it will adopt a technology interface similar to the Unified Payments Interface (UPI) as the digital rupee’s technology layer. National Payments Corporation of India (NPCI) has developed UPI as a real-time instant payment system that facilitates peer-to-peer and person-to-person transactions.

“Just as we have a common library for UPI, CBDC’s technology is similar and hosted by NPCI, it will be interoperable with existing payment platforms,” ​​said an anonymous source familiar with the project. “E-rupees are stored in the wallet, and denominations are available according to the customer’s wishes, just like you ask for cash from an ATM.”

The banking regulator had previously indicated that retail CBDC could be a separate product, but that appears to have changed. The digital rupee will be integrated into online banking services with the RBI, noting that the offering is not intended to replace the existing payment system, but to act in a complementary role.

Enthusiasts are not sure if RBI will choose DLT

The RBI has previously poked holes in the suitability of DLT when it announced a digital version of the national currency. Central banks stated their preference for a centrally controlled, conventional database infrastructure over DLT for several reasons.

“Given the above, DLT is not currently considered an appropriate technology except in very small jurisdictions given the likely low data transfer capacity,” the central bank said.

However, the government notes that DLT will play a key role in its handling in the coming years, with Finance Minister Nirmala Sitharaman expecting a 46 percent DLT adoption rate by 2030.

See: BSV Global Blockchain Convention Panel, Blockchain in the Middle East and South Asia

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