RBI starts pilot programme for wholesale digital rupee in call money market

More use cases on to be tested; Plan to test the entire wholesale segment

The Reserve Bank of India (RBI) on Tuesday initiated a pilot program for the wholesale segment of its central bank digital currency (CBDC) in the interbank call money market, according to dealers from participating banks.

Dealers said nine banks, including four public sector banks and five private sector banks, are participating in the e-rupee call money pilot. This is the second use case of testing wholesale CBDC, the first being the government securities market introduced in November last year.

Sources familiar with the wholesale CBDC pilot said that there will be more use cases in the coming days. “The roadmap is that the entire wholesale segment should be covered like Asset tokenisation where securities will be tokenized, repo transactions etc. eRs will move from bond to call money to repo. Once the entire segment is covered, then a final pilot will be done for the entire wholesale segment,” said a source requesting anonymity, while adding the pilot was successful in the government securities segment.

“The pilot on the call money started on Tuesday, and four PSU banks and five private banks are participating,” a dealer at a state-owned bank said requesting anonymity. “We are not looking at the volume right now. We are just testing the waters,” he added.

In the call money market, banks engage in short-term borrowing and lending activities among themselves, with interest rates determined by prevailing market conditions.

The operational process for the e-rupee pilot remains the same, except for the settlement, which will now be carried out using the CBDC instead of the real-time gross settlement used in trades on the Clearing Corp of India Limited (CCIL).  Dealers said the settlements will be in T+0 mode, indicating that trades will be settled on the same day.

“There won’t be any significant impact on the call money market from this pilot,” a dealer at a private bank said. “There might be other benefits like storage cost, and some tax benefits,” he added.

The weighted average call rate has largely remained above the repo rate since August 10, after the announcement of the incremental cash reserve ratio (I-CRR). The weighted average call rate on Thursday was at the same level as Wednesday - 6.72 per cent. The repo rate is at 6.5%.

RBI Executive Director Ajay Kumar Choudhary, who is in-charge of the fintech department, had previously stated that the central bank might launch the wholesale digital rupee pilot for the interbank call market by October.

The pilot of wholesale CBDC, also known as Digital Rupee-Wholesale (e-W), was started for the government securities market in November last year. It was restricted to facilitating the settlement of secondary market transactions in government securities. Subsequently, the pilot for the retail CBDC commenced on December 1.

According to dealers. most participating banks remain the same from the wholesale e-rupee pilot for the government securities market with Federal Bank replacing HSBC in the call money pilot.

State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC were part of the wholesale CBDC in government securities pilot program.