Credit and finance for MSMEs: The first pilot of the digital rupee for the retail segment — comprising customers and merchants – to be launched on December 1, 2022, announced by the Reserve Bank of India (RBI) on Tuesday will allow payments to merchants using QR codes displayed at merchant locations. Transactions would be allowed both person to person (P2P) and person to merchant (P2M), similar to transactions done digitally currently. According to RBI, the retail digital rupee or retail central bank digital currency (CBDC) would be a digital token issued in the same denominations of paper currency and coins and distributed through banks.
The central bank noted that the pilot would cover only select locations in closed user group (CUG) comprising participating customers and merchants and transactions would be enabled through a digital wallet offered by the participating banks and stored on mobile phones/ devices.
The retail pilot to be undertaken by RBI will aim to check the robustness of the “entire process of digital rupee creation” its distribution and retail usage in real time. Moreover, different features and applications of the e₹-R token (retail digital rupee) and architecture will be tested in future pilots, based on the learnings from this pilot, RBI noted.
Welcoming the RBI move, Anand Kumar Bajaj, Founder, MD & CEO of digital payments company PayNearby said when it comes to payments done at merchants’ outlets, QR codes are already working wonders. “With retail digital rupee also being supported via QR codes at these outlets, we hope to see greater adoption. Our integration with retailers across 20,000+ PIN codes, including kirana stores which serve as a multi-utility point for consumers in the remote areas of Bharat, will further accelerate the Government’s initiative of a cashless nation backed by e₹-R.”
The pilot will have “phase-wise participation” of eight banks identified by RBI, beginning with State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank in the first phase in four cities Mumbai, New Delhi, Bengaluru and Bhubaneswar followed by Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank joining the pilot. It will expand to other cities viz., Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. Based on the requirement, more banks, users and locations would be added to the pilot.
The latest move by RBI assumes significance as the digital payments market continues to evolve rapidly. According to Statista, the P2M market in India is estimated to reach Rs 84 lakh crore by the financial year 2025 from around Rs 18 lakh crore in FY19 with Paytm, PhonePe, Google Pay, etc., among key players. Overall, India’s digital payments market is expected to grow over threefold from $3 trillion currently to $10 trillion by 2026, a report by PhonePe and Boston Consulting Group (BCG) had said in June this year.
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