New Delhi: IDFC FIRST Bank has partnered with ToneTag, a global proximity and voice tech solution provider, to enable acceptance of digital rupee at merchant outlets. This follows a pilot launch of Central Bank Digital Currency (CBDC) for retail users by the Reserve Bank of India (RBI).
RBI launched on 1 December a pilot for retail digital rupee (e ₹ R) with four banks in four cities, including IDFC FIRST Bank, a month after testing the wholesale CBDC.
As part of the pilot, the digital currency is issued in the same denominations and distributed through financial intermediaries and users will be able to transact through a digital wallet offered by participating banks.
The CBDC will be mainly used for retail payments just like “cash”. It will be a digital rupee (e ₹-R) signifying legal tender in the form of digital token and issued in the same denominations as paper currency and coins and will be distributed through intermediaries, i.e., banks. As per RBI, users will be able to transact with e ₹-R through a digital wallet offered by the participating banks and stored on mobile phones or hardware wallets to facilitate person-to-person (P2P) and person-to-merchant (P2M) transactions. The e ₹-R will continue to offer features of physical cash of safety, trust, and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks.
Madhivanan Balkrishnan, COO, IDFC FIRST Bank, said, “This solution will change how merchants transact, and IDFC FIRST Bank is a proud partner in this collaboration. Digitization of cash payments is one more step in making transactions easier for our customers. As a bank that firmly believes in ‘Customer First’ approach this initiative aligns well with the same.”
Kumar Abhishek, founder & CEO ToneTag, said, “We are glad to collaborate with IDFC First Bank and participate in the first phase of CBDC retail pilot. In this pilot ToneTag will provide solutions through which merchants will be enabled to accept digital currency. With this launch India becomes one of the only few countries Globally to take this leap of digitalizing cash and reap its great potential to reduce counterparty credit and liquidity concerns, as well as increase the efficiency of payments and securities settlement. This indeed is going to be India’s decade and many kudos to RBI.”
The main drivers for considering the issuance of CBDC in India, among others, is the need to reduce operational costs associated with managing physical cash, promote financial inclusion, improve the payments system’s resilience, efficiency, and innovation, increase the settlement system’s efficiency, foster innovation in cross-border payments, and give the general public access to uses that private virtual currencies can offer without the risks involved.
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