Indian central bank on track to launch retail CBDC pilot next month

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The Reserve Bank of India (RBI), the country’s cen­tral bank, is final­iz­ing the roll­out of the retail dig­i­tal rupee pilot, the Eco­nom­ic Times of India (ETI) report­ed on Nov. 19.

The RBI ini­ti­at­ed the whole­sale cen­tral bank dig­i­tal cur­ren­cy (CBDC) pilot on Nov. 1 to test its usage in set­tling trans­ac­tions in gov­ern­ment secu­ri­ties. At the time, the RBI had said that the retail dig­i­tal rupee pilot would be launched with­in a month.

Accord­ing to the ETI report, the dig­i­tal rupee is meant to com­ple­ment, rather than replace, exist­ing pay­ment meth­ods. Addi­tion­al­ly, the report not­ed that the retail CBDC had been designed to be inter­op­er­a­ble with cur­rent pay­ment sys­tems, cit­ing sources famil­iar with the matter.

The report not­ed that the CBDC plat­form will be host­ed by the Nation­al Pay­ments Cor­po­ra­tion of India (NPCI) and will be sim­i­lar to the NPCI’s uni­fied pay­ments inter­face (UPI) system.

UPI has emerged as a pop­u­lar pay­ment method in India, enabling users to instant­ly trans­fer funds direct­ly to and from bank accounts through a UPI address. The UPI address­es, sim­i­lar to email address­es, are linked to the bank accounts.

An anony­mous source with knowl­edge of the project told ETI:

“Just like we have a com­mon library for UPI, the tech­nol­o­gy for CBDC is sim­i­lar to that and it is being host­ed by NPCI, it will be inter­op­er­a­ble with the cur­rent pay­ment platforms.

The e‑rupee will be stored in a wal­let, the denom­i­na­tions will be avail­able as per the customer’s request, just like you request cash from an ATM. Banks are launch­ing this only in select cities.”

The RBI wants each bank par­tic­i­pat­ing in the pilot to test the retail CBDC among 10,000 to 50,000 users, per the ETI report. The banks par­tic­i­pat­ing in the retail CBDC pilot include State Bank of India, Bank of Bar­o­da, ICICI Bank, Union Bank of India, HDFC Bank, Kotak Mahin­dra Bank, Yes Bank, and IDFC First Bank. Accord­ing to the report, the CBDC project will even­tu­al­ly be extend­ed to the entire bank­ing system.

The banks par­tic­i­pat­ing in the CBDC tri­al have part­nered with last-mile pay­ment ser­vice providers, includ­ing PayN­ear­by and Bankit, to enable users to pay mer­chants with the dig­i­tal rupee.

The retail CBDC will be pro­vid­ed as a stand­alone prod­uct in the ini­tial phase. How­ev­er, the dig­i­tal rupee will even­tu­al­ly be inte­grat­ed with exist­ing mobile and inter­net bank­ing services.

Mer­chants and cus­tomers select­ed to par­tic­i­pate in the pilot will be required to down­load a wal­let appli­ca­tion, which will be used to store the e‑rupee, as per the report. In addi­tion, users will need to request spe­cif­ic denom­i­na­tions of the e‑rupee from their banks, which will be trans­ferred to their CBDC wallet.

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