Digital Rupee CBDC Trial Begins in India: Here’s What the Experts Say
India’s digital CBDC, has officially entered its sales period in four cities – New Delhi, Mumbai, Bengaluru, and Bhubaneswar, on Thursday, December 1. State Bank of India, ICICI Bank, the -Yes Bank, and IDFC First bank. Lenders who participate in these tests, and when they are completed, will testify if the CBDC is efficient and robust enough to be used for everyday transactions, increasing its usability. Industry experts in India have expressed optimism about the scope the digital rupee has for adoption.
India recorded the biggest growth, with UPI payments increasing in number after Prime Minister Narendra Modi introduced currency notes of Rs. 500 and Rs. 1,000, which shakes the economy.
The rapid adoption of UPI at the time, now seems to be increasing the enthusiasm for the eventual rollout of India’s CBDC, said Srinivas Nidugondi, Chief Growth and Transformation Officer at communications company Comviva in an interview with Gadgets 360.
“UPI transactions registered an increase of about 118 percent in volume and an increase of over 98 percent in value in Q2 2022 as compared to Q2 2021. Blockchain technology has become a revolutionary new phenomenon in recent times and India using this digital rupee is another step for India to further digitize its economy,” said Nidugondi.
Built on the blockchain, the digital rupee is a virtual representation of India’s fiat currency, which is not, in any way, connected to the crypto sector. Its first trial phase was launched last month.
As part of its retail tests, the Reserve Bank of India (RBI) will test CBDC with selected retailers and customers. The CBDC will be issued to testers in a digital wallet, supported by participating national banks.
“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. Ie ₹-R will provide features of virtual currency like trust, security and payment terminal. As in the case of cash, it will not earn interest and can be converted into other currencies, such as bank deposits,” RBI said. he had said in an official statement last week.
Blockchain technology is well known for bringing transparency to anything built on it. The information and history contained in the blockchain network is irreversible, recording a precise and transparent sequence of events.
Its implementation in the existing financial system of India will automatically increase the transparency issues that keep the current systems far from the full trust of users.
In the coming months, the RBI will expand its CBDC retail trials to other cities, Rachit Chawla, CEO of digital lending marketplace Finway FSC told Gadgets 360.
“The digital rupee is a welcome step to reduce transaction costs, enable real-time settlement of accounts, and speed up cross-border transactions. Later it will be operational in more cities like Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla,” noted Chawla.