RBI’s Central Bank Digital Currency (CBDC) implementation strategy

A form of official cryptocurrency called the Central Bank Digital Currency (CBDC) has recently been launched for retail customers by the Reserve Bank of India (RBI).

The first four cities where the digital rupee, or “e-rupee,” may be used by customers and businesses are Mumbai, New Delhi, Bengaluru, and Bhubaneswar.

The pilot will operate in a closed user group (CUG) composed of participating customers and merchants. Four banks—State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank—will be involved in the controlled rollout of the digital currency in these four locations.

Customers from specific cities will receive CBDC wallets containing notes that have been digitally printed with the signature of the RBI Governor.

About  CBDC

  • CBDC is a cryptocurrency that the RBI has authorised as legal tender. It is interchangeable one-to-one with fiat currency and is the same as fiat currency.
  • Its form is the only thing that differs from physical cash; it is not made of paper (or polymer).
  • The holders of this fungible legal money are not required to have a bank account. On the balance statement of the RBI, CBDC will also show up as a “liability” (currency in circulation).

The types of e-rupee

  • The RBI has divided the digital rupee into retail and wholesale categories based on usage, the tasks carried out by it, and varying levels of accessibility.
  • Retail e-rupee: This electronic cash alternative is primarily designed for retail transactions. It has the ability to be used by virtually everyone and can offer access to secure funds for settlement and payment.
  • Wholesale CBDC is intended for limited access to specific financial institutions. In terms of operational expenses, the use of collateral, and liquidity management, it has the potential to alter the settlement systems for financial transactions carried out by banks in the government securities (G-Sec) segment and on the interbank market.


  • E-rupees will be distributed through intermediaries, namely banks, and will be issued in the same denominations as coins and paper money. The participating banks’ digital wallets will be used for transactions, and mobile devices will store the wallet data.
  • P2P (person-to-person) and P2M (person-to-merchant) transactions are both possible (P2M). At the retailer’s location, there will be QR codes for P2M transactions (like shopping).
  • Just like with physical cash withdrawals now, users will be able to withdraw digital tokens from banks. He or she will be able to store his or her digital tokens in the wallet and use them to transfer funds via an app, make purchases online, or in person.

Difference between CBDC and other wallets

  • It will be used in a manner that is not significantly different. However, there is a daily and per-transaction spending cap for UPI-based apps like Google Pay and Paytm. The amount of digital rupees that can be stored in wallets is not capped by the RBI. Transactions in digital rupees over Rs 2 lakh are likely to be reported for tax purposes.

CBDC benefits

  • It might perhaps result in a more robust, efficient, trusted, regulated and legal tender-based payments option. • It has the potential to offer considerable benefits, such as decreased dependence on cash, higher seigniorage due to lower transaction costs, and reduced settlement risk.
  • In the future, it is likely to be a weapon in the arsenal of every central bank. A more real-time and cost-effective globalisation of payment systems could be made possible by CBDCs, but setting this up will require careful calibration and nuanced execution.
  • The widespread adoption of CBDC might also require that monetary policies be designed in such a way as to add more liquidity to the system than is necessary in order to stop currency leakage from the banking system.

CBDCs vs virtual currencies

  • CBDC as “legal tender issued in digital form by a central bank. It is interchangeable one-to-one with fiat currency and is the same as fiat currency. Its only distinction is in form.
  • In contrast, “private virtual currencies sit at significant variance with the historical concept of money. They have no intrinsic worth, hence they are not commodities or claims on commodities; some assertions that they are similar to gold are obviously opportunistic.
  • CBDC is distinct from stable coins and cryptocurrencies, which are produced by private companies. A cryptocurrency’s worth is generated from the assumption that it would be appreciated and used by others, unlike a CBDC, which will be the central bank’s liability.
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