The Reserve Bank of India announced the first pilot in the digital rupee or e-rupee in the wholesale segment starting from today, i.e November 1st 2022. The pilot part will commence in the government securities. Nine banks including 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 Bank will participate in the pilot as per the official statement from the Reserve Bank of India. They will be used in the secondary market transactions in the government securities. The settlement in the Central Bank money will sure reduce the transaction costs. The Central Bank said that they would focus on the other wholesale transactions and cross-border payments in the coming days.

E-rupee or CBDC can be token-based or account-based. The token-based CBDC will be an intstrument like banknotes and the person who will receive the amount will verify his ownership of token. It is a preferred mode for CBDC-R as it is close to physical cash. An account-based CBDC will require the maintanence of records of balances and transactions of all the holders. An intermediary will have to verify the identity of the account holder and this system is called as CBDC-W. There are two models: Direct Model and Indirect Model. For the direct model, the Central Bank is responsible to manage the aspects of the digital rupee system like account-keeping, transaction verification and issuance. For the indirect model, there will be intermediaries and other roles. The digital rupee will be a liability on the balance sheet of the Central Bank.