Money & Banking

Money & Banking

Reserve Bank of India (RBI) launched Retail Digital Rupee

  • RBI released the central bank digital currency (CBDC)- digital rupee or e-rupee – for retail customers and merchants.
  • Earlier, RBI launched digital rupee in the wholesale segment to settle secondary market transactions in government securities.
  • Initially, four banks will be involved in controlled launch of digital currency namely, SBI, ICICI Bank, Yes Bank, and IDFC First Bank in Mumbai, New Delhi, Bengaluru and Bhubaneswar.
  • These banks will issue digital tokens in the same denominations as paper currency, which can be used to make and receive payments.
  • This is an Indirect model of CBDC.

About Retail e-rupee

  • Retail e-rupee will be an electronic version of cash and primarily meant for retail transactions.
  • It will be potentially available for use by all i.e., private sector, non-financial consumers and businesses.
  • It will provide access to safe money for payment and settlement, as it will be a direct liability of the central bank.
  • CBDC or Digital rupee is a legal tender issued by RBI in digital form.
  • It is the same as fiat currency and exchangeable one-to-one with fiat currency.

Model for Issuance and Management of CBDC

  • Direct model (Single Tier model) where the central bank is responsible for managing all aspects of the CBDC system viz. issuance, account-keeping and transaction verification.
  • Indirect model (Two-Tier model) where central bank and other intermediaries (banks and any other service providers), each play their respective role.
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