The project’s use case is intended to settle secondary market transactions in government securities. Credit: Ayaneshu Bhardwaj on Unsplash.

The Reserve Bank of India (RBI) has revealed its plan to roll out a pilot programme for digital rupee in the wholesale segment.

For the initial launches, the central bank has selected nine banks including State Bank of India, Bank of Baroda, Union Bank of India, HDFC, ICICI, Kotak Mahindra Bank, YES Bank, IDFC First Bank and HSBC.

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According to RBI, the project’s use case is intended to settle secondary market transactions in government securities.

Further, the Central Bank Digital Currency (CBDC) is expected to make the inter-bank market efficient.

The central bank in a statement said: “Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk.”

Following the assessment of the current pilot project, the RBI will take a call on initiating pilots on other wholesale transactions as well as cross-border payments.

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Meanwhile, the bank plans to commence the digital rupee pilot in retail segment in a month. The pilot will be launched in select locations in “closed user groups comprising customers and merchants.”

While CBDC in retail segment can be used by all including private sector and non-financial consumers, wholesale CBDC is meant for select financial institutions.

As an electronic version of cash, retail CBDC will be used for retail transactions, and wholesale digital rupee will be used to settle interbank transfers and other related transactions.

In a concept note issued recently, the RBI described CBDC or e-Rupee as a legal tender issued by the central bank.

In the notification, the bank noted that the digital rupee is exchangeable one-to-one on a par with existing currency.