India continues to move steadily forward towards implementing and extending the use of its own digital currency. The recently launched pilot program is aimed at using the central bank’s digital currency for settlements with government securities in the secondary market. The Reserve Bank of India (RBI) has commenced a pilot project under which the digital rupee can be used only in the wholesale segment. The regulator believes that transition to the digital rupee will make the interbank market more efficient and will “reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk.” According to the RBI’s official statement, the following nine banks have been selected to participate in the pilot scheme: 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 Indian subsidiary. The RBI is sure that bank-backed digital money will give consumers the same experience of trading currencies in digital form without the hazards associated with cryptocurrencies. The regulator points out that the digital rupee has the benefits of digital currencies and, at the same time, protects consumers from social and economic risks that private virtual currencies may pose.
