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India's central bank, the Reserve Bank of India, will pilot its own version of central bank digital currency (CBDC) this month, the regulator announced in a press release.
The central bank wants to see how the digital version of rupee will work for processing settlements of secondary market transactions in government securities. The financial regulator hopes that the digital currency will make the inter-bank market "more efficient."
"Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk," the central bank said.
The bank has already selected nine banks, including HDFC Bank and HSBC for participation in the pilot. The pilot will be conducted in select locations and in closed user groups.
