The volume of government securities (G-Sec) transactions on the secondary market using the central bank’s digital currency hit its highest level since its inception on November 11.

According to data compiled by NDS-OM CBDC Transactions, G-Sec transactions using digital rupees were worth Rs 530 crore on November 7, with Rs 500 crore in transactions holding 10-year benchmark 7.26%-2032 bonds. This is followed by 7.1% in 2029 and 7.38% in 2027 for Rs 20 crore and Rs 10 crore bond deals.

Meanwhile, on November 4, transactions worth Rs 385 crore were settled using the CBDC. They were worth Rs 200 crore on November 3, Rs 290 crore on November 2 and Rs 275 crore on November 1.

Transactions worth Rs 260 crore were executed using digital rupees on the G-Sec secondary market at 1 pm today.

Last week, Moneycontrol reported that in the first three days after the RBI announced a digital currency wholesale pilot, Union Bank of India executed more than 25% of overall government securities transactions on the secondary market.

An official from Union Bank of India said the bank has traded bonds worth Rs 70 crore a day since the pilot began.

CBDC is a central bank digital currency, legal tender issued in digital form. It is the same as fiat currency and can be exchanged one-to-one with government-issued currencies. In other words, a CBDC is the same fiat currency we use — just in digital form.

CBDC will simplify transactions. A report by the Reserve Bank of India describes CBDCs as a safe, secure and convenient alternative to physical cash. It can also take the form of complex financial instruments, depending on different design choices, the RBI said in the report.

The Reserve Bank of India (RBI) on October 31 announced a trial of the digital rupee for specific use cases. Hence, the first pilot of the wholesale portion of the digital rupee (e₹-W) will start on November 1, 2022.

The central bank identified the State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC to participate in the pilot project in this area. Banks will use the new platform to trade government securities between them using digital currencies.

The central bank said the settlement in central bank currency would lower transaction costs by eliminating the need for settlement guarantee infrastructure or collateral upfront to reduce settlement risk.

RBI Governor Shaktikanta Das said on November 2 that wholesale digital currency is a major shift in the way business is done.

The central bank’s digital currency wholesale pilot is a landmark moment in monetary history, the Governor of the Reserve Bank of India said at the annual banking conference jointly organized by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Indian Banks Association (IBA).