The Reserve Bank of India (RBI) will launch the pilot for a central-bank-backed digital rupee for the wholesale segment on November 1, it said on Monday, identifying nine banks, including top lender State Bank of India, to participate in the project.

The pilot’s use case will be to settle secondary market transactions in government securities, with the e-rupee expected to make the interbank market more efficient, the RBI said in a statement.

Settlements in central bank digital currency would reduce transaction costs, the RBI added.

Besides SBI, the pilot will include Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC, the RBI said.

The launch of the e-rupee for the retail segment is planned within a month in select locations, the RBI added.

The RBI has been exploring the pros and cons of a central bank digital currency for some time and is working towards a strategy to implement it in a phased manner, it said earlier this month.

The central bank’s plans for a currency in digital form comes amid its staunch opposition of cryptocurrencies.

The announcement comes a few days after it was reported that China’s digital yuan took the centre stage in the world’s largest cross-border central bank digital currency (CBDC) trial to date, a report showed, pointing to how Beijing is speeding up yuan globalization efforts amid rising geopolitical tensions.

China’s digital currency, or e-CNY, was the most issued, and actively transacted token in the $22 million pilot that used CBDCs to settle cross-border trades, a Bank of International Settlement (BIS) report showed.

The six-week test, which ended late last month, is part of m-Bridge – a project that pilots cross-border payments in digital currencies issued by central banks of China, Hong Kong, Thailand and United Arab Emirates.

The successful completion of the large-scale testing comes amid rising global tensions.

© Thomson Reuters 2022