RBI and Digital Currency:
- The Reserve Bank of India this week launched the digital rupee on a pilot basis.
- The digital currency will be offered by a select group of public and private banks in a few major cities initially, which can be used for both person–to–person and person–to–merchant transactions.
- The pilot will initially cover the four cities of Mumbai, New Delhi, Bengaluru, and Bhubaneswar, where customers and merchants will be able to use the digital rupee (e₹-R).
- Four banks will be involved in the controlled launch of the digital currency in these four cities: State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank.
- The service will be subsequently extended to the cities of Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.
- Four more banks — Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank — will join the pilot.
- The digital rupee, or the e–rupee, is a central bank digital currency issued by the RBI.
- It is similar to the physical cash that you hold in your wallet except that the e-rupee is held electronically in a digital wallet overseen by the RBI.
- The digital rupee is recognised as legal tender by the RBI, and thus has to be accepted by everyone in the country as a medium of exchange.
- Unlike deposits which are paid interest, the digital rupees in your wallet are not paid any interest by the central bank.
- Deposits held in banks can be converted into digital rupees and vice-versa.