MC Exclusive | RBI starts wholesale CBDC pilot for call money, say sources

Reserve Bank of India

The Reserve Bank of India (RBI) has started the wholesale pilot of its central bank digital currency (CBDC) in the call money market, two persons aware of the development told Moneycontrol on October 12.

“We have started the wholesale CBDC pilot in the call money market and some deals have also taken place,” one of them said on condition of anonymity.

The call money market is where banks borrow from or lend to each other for the short term, usually one day, at market-determined rates.

The sources added that nine banks participating in this pilot were part of the wholesale pilot of government securities, which was launched on November 1, 2022, to settle secondary market transactions in government securities.

In wholesale CBDC in government securities, State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC were part of the pilot.

“All the banks are the same, just Federal Bank is added,” one of the persons said about this project.

Also read: Around 15,000 transactions per day taking place in retail CBDC, says RBI DG

An email sent to the RBI remained unanswered at the publishing of this article.

On September 10, Ajay Kumar Choudhary, an executive director at the RBI, said on the sidelines of the G20 Leaders' Summit in New Delhi that the central bank would introduce the wholesale version of its CBDC, the Digital Rupee-Wholesale, in the call money market by October.

"(It will be) very soon. We are going to start interbank borrowing in wholesale CBDC this month itself. Either this month (September) or next month (October). We are testing it. Once we are ready we will be able to start," Choudhary said.

Earlier, on September 6, RBI Governor Shaktikanta Das at the Global Fintech Fest 2023 said the central bank was planning to test some more use cases in the wholesale pilot of CBDC.

Das added that CBDC needs to be introduced in a non-disruptive manner. Therefore, the central bank was following a strategy of calibrated and phased implementation.

The introduction of CBDC was announced in the Union Budget 2022-23 by Finance Minister Nirmala Sitharaman and necessary amendments to the relevant section of the RBI Act, 1934, were made with the passage of the Finance Bill, 2022.

Also read: Exclusive | UCO Bank to join CBDC pilot project by September 2023, says MD & CEO Ashwani Kumar

Retail CBDC

The central bank rolled out a pilot in the retail version of the CBDC on December 1, 2022. The e-rupee is in the form of a digital token that represents legal tender.

It is being issued in the same denominations as the paper currency and coins. It is being distributed through financial intermediaries like banks. Users can transact with e-rupee through a digital wallet offered by the participating banks.

The e-rupee or digital rupee in wholesale and retail circulation stood at Rs 16.39 crore at end of 2022-23, according to the Reserve Bank of India (RBI) Handbook of Statistics on the Indian Economy 2022-23.

The denomination of the e-rupee most in circulation is Rs 500, followed by Rs 200 and Rs 100, data showed.

On September 14, RBI deputy governor T. Rabi Sankar said around 15,000 daily transactions were taking place in the pilot testing of retail CBDC. “It is roughly around 15,000 transactions a day or so, we will have to take it to 1 million,” Sankar said on the sidelines of the Global SME Finance Forum 2023.