Mumbai, February 1, 2023: IDFC FIRST Bank has teamed up with ToneTag, a global leader in proximity and voice technology solutions, to bring the acceptance of the Digital Rupee to merchants. This partnership follows a pilot program launched by the Reserve Bank of India (RBI), which recently announced the introduction of a Central Bank Digital Currency (CBDC) for retail users.
IDFC FIRST Bank is one of the four banks participating in the first phase of this implementation. The digital currency will be issued in the same denominations as physical cash and distributed through financial intermediaries, allowing users to make transactions through a digital wallet provided by the participating banks. The digital rupee offers the same trusted, safe, and final settlement features as physical cash and, like cash, will not earn any interest and can be converted to other forms of currency such as bank deposits.
Madhivanan Balkrishnan, COO, IDFC FIRST Bank said, “This solution will change how merchants transact, and IDFC FIRST Bank is a proud partner in this collaboration. Digitization of cash payments is one more step in making transactions easier for our customers. As a bank that firmly believes in ‘Customer First’ approach this initiative aligns well with the same.”
The Central Bank Digital Currency (CBDC) is specifically designed for retail payments, functioning like traditional “cash.” The digital rupee, represented as e₹-R, is a legally recognized digital token issued in the same denominations as paper currency and coins and will be distributed through financial intermediaries, such as banks. The Reserve Bank of India (RBI) has stated that users will be able to make transactions with e₹-R through digital wallets provided by participating banks and stored on mobile phones or hardware wallets for both person-to-person (P2P) and person-to-merchant (P2M) transactions. The e₹-R offers the same safety, trust, and final settlement features as physical cash and, like cash, will not earn any interest and can be converted to other forms of currency such as bank deposits.
On ToneTag’s contribution to the pilot launch, Kumar Abhishek, Founder & CEO ToneTag said “We are glad to collaborate with IDFC First Bank and participate in the first phase of CBDC retail pilot. In this pilot ToneTag will provide solutions through which merchants will be enabled to accept digital currency. With this launch India becomes one of the only few companies Globally to take this leap of digitalizing cash and reap it’s great potential to reduce counterparty credit and liquidity concerns, as well as increase the efficiency of payments and securities settlement. This indeed is going to be India’s decade and many kudos to RBI”
The key motivations behind the consideration of issuing a Central Bank Digital Currency (CBDC) in India include reducing the costs associated with handling physical cash, increasing financial access and inclusion, enhancing the efficiency, resilience, and innovation of the payment system, improving the efficiency of the settlement system, fostering cross-border payment innovation, and providing the public with the benefits of private virtual currencies while mitigating related risks.