RBI sets the stage for launch of digital rupee

MUMBAI: India's central bank on Friday took a big step towards rolling out the e-rupee - a digital legal tender backed by the Reserve Bank of India (RBI) by announcing that a trial run would be conducted soon, and by releasing a concept paper offering insights into the electronic currency's objectives, benefits, risks, design choices, and technology.

- Swaraj Singh Dhanjal

The e-rupee will be issued and backed by RBI just like physical banknotes unlike private cryptocurrencies such as bitcoin that are generated through a decentralised process of computerised mining. Finance minister Nirmala Sitharaman, in her budget speech in February, indicated that the central bank would launch a digital version of the rupee this financial year.

RBI is considering implementing an account-based central bank digital currency (CBDC) for the wholesale segment and token-based currency for the retail sector, the concept paper said.

"CBDC holds a lot of promises by way of ensuring transparency and low cost of operation among other benefits and the potential to expand the existing payment systems to address the needs of a wider category of users," RBI said in the paper.

Experts said RBI's move indicated that the launch of the digital currency was imminent.