In an announcement today, the Reserve Bank of India (RBI) said it has commenced the pilot program of its central bank digital currency (CBDC). As revealed, the RBI will test the retail application of the digital rupee in four major cities of India namely Mumbai, New Delhi, Bengaluru and Bhubaneswar.
Additionally, the pilot program of the digital rupee will witness the participation of four banks. These banks are State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank. While the program is currently limited to the four cities and banks mentioned above, the RBI intends to extend the program.
Soon, the pilot program of the digital rupee will be extended to nine more cities. Also, four financial institutions will be added to the program. It’s imperative to note that the program is running with the participation of selected customers and merchants.
Furthermore, the digital rupee will come in the same denominations used by existing fiat coins and notes. Likewise, payment merchants will make available QR codes that users can scan and make payments. However, merchants won’t earn any interest in providing the payment option.
Using the digital rupee to rival cryptocurrency in India
Recall that the RBI has maintained a strong position against cryptocurrency. Before now, the apex financial body in India has shown a strong admiration to provide alternatives to the use of cryptocurrency. Insights about the digital rupee first surfaced officially during the presentation of Finance Minister Nirmala Sitharaman’s budget speech in February.
Then, the minister said the RBI would issue the digital rupee before the end of 2023. So the decision to start the pilot programme of the CBDC surfaced in October. As it stands, the RBI will be pushing the CBDC as an alternative to cryptocurrency. The apex body believes that the total banning of cryptocurrency is the best option for India.
In the past, the RBI and Finance Minister Nirmala Sitharaman has dished out strong policies against cryptocurrency in India. Some of these policies include the introduction of a 30% and a 1% TDS tax rate on cryptocurrency. The opposing stand of the RBI against cryptocurrency has affected the growth of the industry in India. Now, the introduction of the digital rupee will also push the growth of the crypto sector downwards in India.
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