The Reserve Bank of India (RBI) is on track to debut a central bank digital currency (CBDC) after announcing its digital rupee project in February.
The central bank of India will launch the digital rupee pilot for the wholesale segment on Nov. 1, the RBI announced on Oct. 31.
The pilot will involve nine locally operating banks, including the biggest Indian bank, the State Bank of India. According to a report by Reuters, other banks in the pilot will also include Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC.
The main use case of India’s CBDC pilot will be to settle secondary market transactions in government securities. The digital rupee is expected to add more efficiency to the interbank market by reducing transaction costs of settlements, the RBI said.
Wholesale CBDCs are a type of CBDC primarily used by financial institutions like banks, involving interbank transactions such as securities settlement and cross-currency payments.
Unlike wholesale CBDCs, retail CBDCs are utilized by households and businesses, allowing them to make payments directly and store value via the digital version of a specific fiat currency, like the Indian rupee. According to the new report, the RBI plans to launch the digital rupee for the retail segment within a month in select locations.
India has been somewhat quick in launching a CBDC. Indian Finance Minister Nirmala Sitharaman announced the initial plans in February 2022, declaring that a digital rupee would be a “big boost” for India’s economy. The RBI then proposed a three-step graded approach for its rollout, aiming for little or no disruption to the traditional financial system.
While rushing the CBDC’s development, the Indian government has been taking measures to make crypto less attractive for local investors, including adopting a 30% tax on digital asset holdings and transfers in April. As previously reported by Cointelegraph, the new crypto taxes had a negative impact on the country’s crypto ecosystem, forcing industry entrepreneurs to move to friendlier jurisdictions.