India moves towards digital currency, trial of digital rupee started

Retail trial of digital rupee has started in the country. This trial has been started in four big cities – Delhi, Mumbai, Bengaluru and Bhubaneswar from Thursday. After its completion, it will be decided whether the Central Bank Digital Currency (CBDC) is an efficient means for everyday purchases or not.

This trial Participating banks include State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank. There has been a rapid growth in UPI payments after demonetization in the country. Digital rupee can also get the benefit of this. CBDC is a blockchain-based payment solution, which is controlled by the Central Bank. It works like cryptocurrencies but unlike cryptocurrencies, CBDCs do not have the volatility and other risks. In this year’s budget, the central government had announced the launch of CBDC from the financial year 2022-23.

Srinivas Nidugondi, chief transformation officer at telecom firm Comviva, told Gadgets 360, “The second quarter of the current year saw an increase of nearly 118 percent in terms of volume and over 98 percent in value in UPI transactions as compared to the first quarter of the current year. Technology is a game changer innovation and India is using it for digital rupee to digitize its economy.” The trial run for the wholesale segment of Digital Rupee was started last month.

For trial in retail segment cbdc will be given in a digital wallet. This wallet will be compatible with smartphones and PCs. In this regard, the Reserve Bank of India (RBI) has said in a statement, “Transactions can be both person-to-person (P2P) and person-to-merchant (P2M). Payments to merchants can be made using QR codes present at merchant locations.” No interest will be earned on digital rupee like cash, nor can it be converted into instruments like fixed deposits with banks. This is likely to reduce the cost of transactions. RBI is among the few Central Banks in the world that have started the CBDC project.