Banks are likely to launch wholesale Central Bank Digital Currency (CBDC) by January next year as they move cautiously to test the infrastructure for the digital currency for companies.
In the first phase, the lenders will target small and medium enterprises (SMEs) to ensure a smooth roll-out of the system.
“The infrastructure for wholesale and retail CBDC is not very different but we need to be careful with wholesale CBDC because it will involve large transactions for which banks will be required to put in place foolproof accounting, auditing and settlement reporting systems and other security safeguards,” a senior bank official
told FE.
“Based on our progress, we expect to launch wholesale CBDC by January next year,” he added.
The Reserve Bank of India (RBI) launched the wholesale pilot of CBDC on November 1 last year to settle secondary market transactions in government securities.
Bankers say that the central bank does not want banks to rush in to launch wholesale CBDC.
Lenders who are working on wholesale CBDC include SBI, Bank of Baroda, Union Bank of India, ICICI Bank, HDFC Bank, Kotak Mahindra Bank and Yes Bank.
“Our ideal customers in the first phase will be SMEs.
“If we target MSMEs, their ticket size will be low while the volume of transactions will be high and in the first phase banks would not want it because they have to test the reliability of the system,” another bank official told FE.
“We will first start with SMEs because their average transaction value and the number of transactions will not be very high,” he added.
Large corporate will be onboarded later because their transaction size is going to be bigger, he added.
Banks are working with their partners to deploy CBDC infrastructure and usually, it takes around three months to deploy the system.
Officials say that one of the main challenges for the banks is to convince corporates to use CBDC when they already using Real Time Gross Settlement (RTGS) system.
Companies know that there is a well-defined and tested system in the RTGS in case of any dispute in payment between the sender and the receiver.
“Wholesale CBDC is a new concept and companies have some concerns about dispute settlement. We need to create more awareness about dispute settlement among companies,” another bank official told FE.