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India’s Slow and Steady Approach to CBDC

by Carolina Lynch

The Reserve Bank of India (RBI) has launched a retail Central Bank Digital Currency (CBDC) pilot, which has onboarded 50,000 users and 5,000 merchants. The two-month period saw 0.77 million e-rupee transactions being carried out. Currently, the digital rupee (e-rupee) is available in a closed group of banks, cities, and merchants. The RBI is taking a cautious approach to the introduction of CBDC and has stopped onboarding new users for the moment. The Indian Finance Minister Nirmala Sitharaman announced in February 2022 that the country would launch its CBDC in the upcoming financial year, 2022-2023.

The wholesale CBDC pilot has failed to impress bankers after one month of its trial. The use of e-rupee for the wholesale segment during its current trial state is limited to buying government securities from the secondary market. It is intended to ease interbank settlements in the security market by taking out the role of settlement guarantee and clearing house. However, bankers find it tedious to provide e-rupee settlements for every trade instead of sending batches of settlements by netting a group of trades in the existing clearing house system.

Visa CEO Alfred Kelly observed that both stablecoins and CBDC can play meaningful roles in global payments. He believes that the two can co-exist and complement each other. The RBI is taking a slow and gradual approach to the introduction of CBDC and wants to understand the likely impact before taking any steps. The next phase of the e-rupee pilot will involve five more banks and nine more cities.

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