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regular-article-logo Friday, 23 February 2024

RBI to launch central bank digital currency on Tuesday

Pilot will see nine banks, including SBI, HDFC Bank and ICICI Bank, settling secondary market transactions in government securities

Our Special Correspondent Mumbai Published 01.11.22, 02:43 AM
Reserve Bank of India.

Reserve Bank of India. File picture

The Reserve Bank of India (RBI) will launch the central bank digital currency (CBDC) or e-rupee on Tuesday.

It will be initially available for the wholesale segment and extended to the retail category in a month.

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The pilot will see nine banks, including SBI, HDFC Bank and ICICI Bank, settling secondary market transactions in government securities.

“The first pilot in the digital rupee — wholesale segment shall commence on November 1,” the RBI said in a statement on “Operationalisation of Central Bank Digital Currency-Wholesale Pilot”.

The first pilot in the retail segment is planned within a month in select locations among closed user groups comprising customers and merchants.

According to the RBI, the use of the digital rupee in the wholesale segment is expected to make the inter-bank market more efficient.

The other banks that will participate in the pilot project are Bank of Baroda, Union Bank of India, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC.

Future pilots will be undertaken in other other wholesale transactions and cross-border payments, the central bank said.

Meanwhile, the monetary policy committee of the RBI is meeting on Thursday to draft a letter explaining to the government why it failed to meet the inflation target for three consecutive quarters.

The unscheduled meeting was announced only last week by the RBI.

The meeting will be held under the provisions of Section 45ZN of the Reserve Bank of India (RBI) Act 1934.

This section deals with the failure to meet the inflation target of 4 per cent with a band of +/-2 per cent, and the meeting comes after retail inflation consistently breached the upper band of 6 per cent since January.

Since this is the first such meeting, the response by the RBI will be watched keenly. Economists ruled out any rate action from the panel on Thursday.

Some analysts said part of the blame should fall on the Centre for failing to take adequate supply-side measures. Others said the central bank is likely to cite exogenous shocks. It may also point towards the depreciation of the rupee due because of a stronger dollar.

Economists have warned that prices could remain a headache for the RBI due to unseasonal rains.

Digital drive

■ Initially available for wholesale segment

■ Nine banks to use e-rupee to settle government security trades

■ Retail launch in a month among closed user groups

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