The Reserve Bank of India will start testing its retail central bank digital currency (CBDC), the digital rupee, in Mumbai, New Delhi, Bengaluru and Bhubaneswar with the initial participation of four banks, including the State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank, the central bank announced Tuesday.
Later, the pilot program will extend to nine more cities and another four institutions will join, the RBI said.
The testing will be conducted with a select group of customers and merchants, and the CBDC will be issued in the same denominations now used for notes and coins. Payments to merchants will be made using QR codes, and, like cash, the digital rupee won't earn any interest.
The decision to start the pilot Dec. 1 was announced in October. Finance Minister Nirmala Sitharaman had revealed plans to issue a digital rupee in the financial year ending in 2023 during her budget speech in February. India's fiscal year ends on Feb. 28.
The RBI has said that private cryptocurrencies should be banned in India.