On December 1, the RBI will launch the first retail digital rupee pilot.

The RBI said that eight banks have been identified for phase-wise participation in this pilot, but that the testing phase will initially cover only four cities: Mumbai, New Delhi, Bengaluru, and Bhubaneswar.

The Reserve Bank of India (RBI) announced on November 29 that the first retail digital rupee (e-R) pilot will begin on December 1, 2022.

The pilot would cover select locations in a closed user group (CUG) of participating customers and merchants, according to the announcement.

The RBI said that eight banks have been identified for phase-wise participation in this pilot, with the first phase beginning with four banks — State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank — in four cities across the country.

According to a media release issued by the central bank, four more banks — Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank — will join this pilot later.

"The pilot would begin in four cities: Mumbai, New Delhi, Bengaluru, and Bhubaneswar, and would later expand to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla. As needed, the pilot's scope may be gradually expanded to include more banks, users, and locations "It stated.

The pilot programme is aimed at "testing the robustness of the entire process of digital rupee creation, distribution and retail usage in real time", RBI said. Different features and applications of the e₹-R token and architecture will be tested in future pilots, based on the learnings from this pilot, it added.

According to the RBI, the e₹-R would be in the form of a digital token that represents legal tender. It would be issued in the same denominations that paper currency and coins are currently issued, and would be distributed through intermediaries, i.e., banks.

Users will be able to transact with e-R via a digital wallet provided by participating banks and stored on mobile phones/devices, according to the RBI.

"Person to Person (P2P) and Person to Merchant (P2M) transactions are both possible (P2M). QR codes displayed at merchant locations can be used to make payments to merchants "It was noted.

The e-R would have physical cash characteristics such as trust, safety, and settlement finality. As with cash, it will not earn interest and can be converted to other forms of money, such as bank deposits, according to the RBI.

(This is a developing story. Please check back for more updates)