IDFC First Bank has joined forces with ToneTag, a global provider of proximity and voice tech solutions, to allow merchants to accept digital rupee as payment. This move follows the Reserve Bank of India (RBI)’s pilot launch of Central Bank Digital Currency (CBDC) for retail users.
RBI launched a retail digital rupee pilot on December 1st with four banks in four cities, including IDFC FIRST Bank, a month after testing its wholesale CBDC.
As part of the pilot, the digital currency is provided in the same denominations and is distributed through financial intermediaries. Users will be able to make transactions through a digital wallet offered by participating banks.
The CBDC will be mainly used for retail payments similar to cash. It will be a digital rupee (e ₹-R) with the same value as physical currency and will be distributed through intermediaries such as banks. Users will be able to use e ₹-R through a digital wallet offered by participating banks, stored on mobile phones or hardware wallets. The e ₹-R will have the same features as physical cash, including safety, trust, and finality of settlement. It will not earn interest like cash, and can be converted to other forms of money like bank deposits.
Madhivanan Balkrishnan, COO of IDFC FIRST Bank, stated, “This solution will revolutionize merchants’ transactions, and IDFC FIRST Bank is proud to be a partner in this partnership. Digitizing cash payments is another step towards making transactions easier for our customers. As a bank that prioritizes the customer first, this initiative aligns with our values.”
Kumar Abhishek, founder and CEO of ToneTag, commented, “We are thrilled to collaborate with IDFC First Bank and be part of the CBDC retail pilot’s first phase. ToneTag will provide solutions for merchants to accept digital currency. With this launch, India becomes one of the few countries globally to digitize cash and take advantage of its potential to reduce credit and liquidity concerns, improve payment and securities settlement efficiency. This is set to be India’s decade and kudos to RBI.”
The main reasons for considering the issuance of CBDC in India include reducing the operational costs of managing physical cash, promoting financial inclusion, enhancing the resilience, efficiency, and innovation of the payment system, improving the efficiency of the settlement system, fostering innovation in cross-border payments, and providing the general public access to the benefits of private virtual currencies without the associated risks.
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