Wholesale CBDC pilot to be extended to call money market

In an ambitious expansion of the pilot studies on Digital Rupee, the wholesale Central Bank Digital Currency will soon be extended to the interbank or call money market. Meanwhile, the Reserve Bank of India is also hoping to touch 1 billion transactions per day on the retail CBDC by the end of this year.

According to sources, the RBI will soon extend the wholesale CBDC pilot to the call money market. “The purpose is to try out different markets and technology. Experimenting on technology for wholesale CBDC is much easier,” said a person familiar with the development.

The first pilot for wholesale CBDC commenced from November 1, 2022 to settle transactions in government securities. The pilot for the retail CBDC was started in December 1. 

Sources said the retail CBDC pilot has seen good adoption with about 20,000 to 25,000 daily transactions in July. Pilots are on with 13 banks in 26 locations with 1.4 million users. “It is expected that retail CBDC transactions will touch 1 billion by December 2023,” said the source, adding that a number of initiatives have been taken to popularise its usage such as making it interoperable with QR codes for merchants.

Sources also said there is no end date for the CBDC pilot studies as the idea is to examine its impact on the financial system.

“CBDCs are not used globally and its impact is not understood...until we understand the risks clearly, it would be difficult to expand it at scale,” said the source.

Meanwhile, the RBI is also planning to extend its frictionless credit delivery to other segments using its public tech platform, which was developed in association with Reserve Bank Innovation Hub.

The RBI had in September 2022 announced a pilot for frictionless delivery of KCC loans up to Rs 1.6 lakh. According to sources, the pilots were conducted in five states including Tamil Nadu, Madhya Pradesh, Maharashtra, Uttar Pradesh and Karnataka as well as for disbursing dairy loans in Gujarat. Loans worth Rs 100 crore were disbursed in the pilots for KCC and dairy loans each.

The pilot of the platform was launched on August 17, 2023. During the pilot, the platform will focus on products such as Kisan Credit Card, dairy loans, MSME loans (without collateral), personal loans and home loans. "Seven banks are presently participating in the platform," said the source, adding that based on the learning, scope and coverage would be expanded to include more products and lenders during the pilot. 

Based on the pilot results, it is likely to be extended to MSME loans of up to Rs 1 crore, small value loans, personal loans and gradually even to educational and car loans.