With CBDC, RBI aims to transform the nature of money. Credit: geralt from Pixabay.

The Reserve Bank of India (RBI) has announced a plan to launch a limited pilot to examine the use of digital rupee for specific use cases.

The announcement was made as part of a concept note on central bank digital currency (CBDC) prepared by central bank’s fintech department.

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With the pilot, which is anticipated to start soon, RBI aims to transform the nature of money and its roles.

The bank plans to implement its strategy for a digital rupee in a phased manner. It seeks to develop several pilots before the final launch in order to have a reduced or zero disruption to the country’s financial activities.

According to the RBI, it will create both wholesale and retail CBDCs.

Wholesale CBDC is capable of augmenting settlement systems, and retail CBDC can provide direct exposure to safe money for payment and settlement, noted the central bank.

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By issuing digital rupee, the RBI seeks to minimise the costs of physical cash management, expand financial inclusion, boost efficiency as well as promote innovation in payments and cross-border transactions.

In the concept paper, the RBI further highlighted the importance of an offline feature in CBDC as a means of connecting people in rural areas during power and mobile network disruptions.

The apex bank said: “CBDC is aimed to complement, rather than replace, current forms of money and is envisaged to provide an additional payment avenue to users, not to replace the existing payment systems.

“Supported by state-of-the-art payment systems of India that are affordable, accessible, convenient, efficient, safe and secure, the Digital Rupee (e₹) system will further bolster India’s digital economy, make the monetary and payment systems more efficient and contribute to furthering financial inclusion.”