RBI set to launch pilot project on digital currency tomorrow

New Delhi, Oct 31: The first pilot of the Central Bank Digital Currency, Digital Rupee will be launched on Tuesday for transactions in government securities.

The use case for the pilot is settlement of secondary market transactions in government securities, the RBI said in a statement on Monday.

Nine banks State Bank of India (SBI), Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC -- have been identified for participation in the pilot.

The digital version of a country's fiat currency that is also a claim on the central bank is known as a Central Bank Digital Currency (CBDC).

Transactions and other services that would usually be carried out with physical money can now be carried out with digital currency.

These digital currencies can be converted into paper currency and will reflect on the RBI's balance sheet, thereby granting it legal tender status.

India is planning to launch its own central bank digital currency in 2023.