RBI’s Digital Rupee will be a game changer, says SBI Chairman Dinesh Khara

Terming Reserve Bank of India's first pilot for retail digital Rupee, or e₹-R, as a game changer,  SBI Chairman Dinesh Khara said that the central bank digital currency will have durable effects and should ensure better monetary transmission at much lesser costs.   

On December 1, the RBI launched the Digital Rupee pilot in four cities - Mumbai, New Delhi, Bengaluru, and Bhubaneswar. The primary idea for floating Digital Rupee is to move away from paper cash and have an entity as against cryptocurrencies. The Reserve Bank of India has defined the e-Rupee as a form of digital token that represents legal tender. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency, and unlike cryptocurrencies, the digital Rupee is issued in the same denominations as paper currency and coins. 

The retail digital rupee (e₹-R) project has started in a closed user group with the participation of four lenders -- State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank -- as well as customers and merchants. 

In a statement issued on Friday, Khare said: "RBI's pilot project on retail-CBDC is a game changer with durable effects that should ensure better monetary transmission at much lesser costs. The anonymity factor is critical for its acceptance. It collaborates, complements and completes the currency architecture in vogue, while also incubating further innovation."  

The launch of digital rupee comes almost a month after the Reserve Bank of India (RBI) started a pilot in the digital rupee - wholesale on November 1. 

As per RBI, in the second phase, four other banks – Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank – will join the pilot run, where the services will be extended to cities such as Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla. 

Talking about the digital Rupee, the RBI had said that it will offer trust, safety and settlement finality. It will not earn any interest as is the case with cash, and can be converted to other forms of money, including deposits with banks.  

The pilot has been launched to test the robustness of the entire process of e₹-R creation, distribution and retail usage in real time. Based on the learnings of this pilot, different features and applications will be tested in future pilots. 

The use of digital rupee is also expected to reduce the operational costs related to management of physical currency as well as increase financial inclusion in the economy. 

Industry voices 

"The pilot implementation of retail CBDC (e₹-R) will allow the testing of the creation, distribution, transacting / settlement of the digital currency for both P2P and P2M transactions at physical locations. Customers will be able to create a wallet having digital tokens of e₹-R and can use it for various transactions / use cases with selected banks in the pilot. The e₹-R will be legal tender backed by the central bank and will be interoperable with existing bank accounts. Key use cases may be programmable payments, x border payments with immediate benefits of lower cost of printing and managing currency, instant payments and finality of settlement and enhanced safety of the e₹-R,” said Mihir Gandhi, Partner & Leader - Payment Transformation, PwC India. 

“The CBDC’s interoperability with other payment systems will certainly contribute to enhanced adoption, co-existence, and innovation, and ultimately result in efficiency and convenience for end-users. The CBDC has some inherent benefits, being a sovereign currency. The primary advantage is that it ensures settlement finality and reduces settlement risks in the financial system. Thus, the e-rupee offers the public enhanced access to digital money. Furthermore, it could provide a robust and safe foundation for private sector innovations to meet the current and future demands for payment services. It will also help in leveling the playing field in payment innovations for firms of all sizes,” said Jaya Vaidhyanathan, CEO, BCT Digital. 

 (With PTI inputs)

Also read: RBI announces launch of first pilot for digital Rupee on Dec 1

Also read: Digital Rupee pilot today: Features, where and how it will be rolled out; all you need to know