India Plans For Wholesale CBDC Expansion into Call Money Markets and Retail CBDC to Reach 1 Billion Transactions Per Day

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In an ambitious expansion of the Digital Rupee pilot studies, the Reserve Bank of India (RBI) is set to broaden the reach of its Central Bank Digital Currency (CBDC) initiatives. Notably, the wholesale CBDC is poised for integration into the interbank and call money market. Concurrently, the RBI harbors hopes of achieving a remarkable milestone in its retail CBDC program by aiming to facilitate 1 billion transactions per day before the close of this year.

Insider reports have revealed the RBI’s intention to extend the wholesale CBDC pilot to the call money market. A source familiar with the development explained, “The primary objective is to explore diverse markets and technologies. Testing technology for wholesale CBDC is a more straightforward endeavor.”

The inaugural phase of the wholesale CBDC pilot, focused on settling government securities transactions, commenced on November 1, 2022. In tandem, the retail CBDC pilot kicked off on December 1, 2022.

Information from sources indicates that the retail CBDC pilot has garnered substantial adoption, witnessing a daily transaction volume ranging from 20,000 to 25,000 in July. This initiative is currently underway with the participation of 13 banks across 26 locations, serving 1.4 million users. The source confidently predicts that retail CBDC transactions will soar to an impressive 1 billion by December 2023. To encourage usage, various measures have been taken, including interoperability with QR codes for merchant transactions.

It is noteworthy that there is no specified termination date for the CBDC pilot studies, underscoring the RBI’s commitment to comprehensively assess its impact on the financial ecosystem. As one source aptly noted, “CBDCs are not yet widely adopted globally, and their impact remains unclear. Until we gain a clearer understanding of the associated risks, scaling up CBDC usage will be a challenging endeavor.”

In addition to its CBDC endeavors, the RBI is charting a course to extend frictionless credit delivery to other sectors through its public technology platform, developed in collaboration with the Reserve Bank Innovation Hub. Notably, in September 2022, the RBI initiated a pilot program for the seamless delivery of Kisan Credit Card (KCC) loans, up to Rs 1.6 lakh.

Sources reveal that these pilots were conducted in five states, including Tamil Nadu, Madhya Pradesh, Maharashtra, Uttar Pradesh, and Karnataka, as well as for disbursing dairy loans in Gujarat. During these pilots, loans worth Rs 100 crore each were disbursed for KCC and dairy loans. The platform’s pilot phase was formally launched on August 17, 2023.

Throughout this pilot, the platform’s focus will encompass products such as Kisan Credit Cards, dairy loans, collateral-free MSME loans, personal loans, and home loans. A source elaborated, “Currently, seven banks are actively participating in the platform.” As the pilot progresses and insights are gained, the scope and coverage of the platform are expected to expand, encompassing a broader array of products and lenders.

Pending the results of the pilot phase, there are prospects for extending its use to cover MSME loans of up to Rs 1 crore, small value loans, personal loans, and potentially even educational and car loans in the future. The RBI’s pursuit of frictionless credit delivery remains an integral part of its broader technological and financial inclusion initiatives.

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