The Reserve Bank of India (RBI) is set to introduce the first pilot to test the use of retail digital rupee (e₹-R) on 1 December 2022.

The pilot will be carried out in selected locations in closed user group (CUG) that includes both customers and merchants.

Once developed, the e₹-R will be made available in digital token format that signifies legal tender.

The digital rupee will feature the same denominations of the existing paper currency and coins. It will be circulated using intermediaries, including banks.  

As part of the pilot, the sustainability of the whole process of creation, distribution and retail usage of digital rupee in real time will be tested.

The pilot will see the participation of altogether eight banks in a phased manner.

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In the first phase, four banks, including State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank, will take part. It will be carried out in four Indian cities, Mumbai, New Delhi, Bengaluru and Bhubaneswar.

In later phases, Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla will be added to conduct the pilot, stated RBI.

RBI plans to examine other features and applications of the e₹-R token in future pilots.

The latest development comes shortly after RBI revealed a plan to launch a limited pilot to study the use of e₹ for specific purposes.

RBI said in a statement: “Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones/devices.

“Transactions can be both person to person (P2P) and person to merchant (P2M).

“Payments to merchants can be made using QR codes displayed at merchant locations. The e₹-R would offer features of physical cash like trust, safety and settlement finality.”