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Explained: What is retail digital rupee (e ₹-R) that RBI will launch on Dec 1 for pilot project?

New Delhi: The Reserve Bank of India (RBI) has announced to launch the first pilot of retail digital Rupee on December 1. The digital currency will be used for settlement of secondary market transactions in government securities. It will make the inter-bank market more efficient.

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Nine banks, viz., 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 have been identified for participation in the pilot.

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What is retail digital rupee (e ₹-R)?

The e ₹-R is a virtual token that can be used as a legal tender, according to the RBI.  It would be issued in the same denominations that paper currency and coins are currently issued. It would be distributed through intermediaries, i.e., banks. 

Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones / devices. Transactions can be both Person to Person (P2P) and Person to Merchant (P2M). 

Payments to merchants can be made using QR codes displayed at merchant locations. The e₹-R would offer features of physical cash like trust, safety and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks.

How will it be useful?

Settlement in central bank money would reduce transactions costs. In future, it might be possible that other wholesale transactions, and cross-border payments will be the focus of future pilots, based on learning from this pilot.

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