The initial excitement among Indian bankers over the launch of a central bank-sponsored digital rupee seems to be fizzling out. They find it adding to their paper and accounting work without bringing any significant benefits over the existing procedures.

Bankers point out that the real benefit of e-rupee may be in the retail and consumer sectors.

Bankers Not Enthused

It has been one month since the launch of the e-rupee for the wholesale segment, but bankers don’t seem to be excited by the entry of the digital alternative of the rupee, Reuters said in a report. They also pointed out some drawbacks.

With the e-rupee, the settlement has to be performed individually for each trade. In contrast, payments are netted off before sending them to the clearing agency for bulk settlements in the established interbank payment system. In other words, the e-rupee adds to the accounting workload without bringing any advantage over the established interbank settlement system.

For the customers, the process of using the digital rupee is similar to net banking, which they are already using and are satisfied with, bankers told the news agency.

The e-rupee is a digital alternative to cash, which offers a certain degree of anonymity as it used distributed-ledger technology. These are the advantages that consumers and retailers might like. But in interbank settlements, it doesn’t bring any advantages, they said.

Expected Benefits of E-Rupee

The benefit that the digital rupee was envisaged to bring was in the arena of settlements. Since it is backed by the central bank, it would preempt the need for a settlement guarantee or a clearing agency to provide such guarantees.

In the first phase, its use was limited to buying government securities from the secondary market. The e-rupee for the wholesale segment was supposed to be used in interbank trade settlements.

India launched the pilot of the central bank digital coin (CBDC), nicknamed e-rupee or digital rupee, for the wholesale segment amid great expectations on November 1.

E-rupee for Retail Launched

Meanwhile, the Reserve Bank of India (RBI) released a similar pilot of the e-rupee for the retail segment on December 1. In the first phase, four banks and four cities have been chosen for the trial, which will be conducted within a closed group between person-to-person (P2P) and person-to-merchant (P2M).

India’s CBDC plans were announced by Indian Finance Minister in her budget speech early this year, where she said the digital rupee will be launched in 2022.

Earlier, Indian Prime Minister Narendra Modi hailed the upcoming e-rupee as something that will strengthen the digital economy and revolutionize the Indian fintech sector.  

The post Indian CBDC Fails to Impress Bankers in Initial Trials: Report appeared first on CryptoPotato.

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