MUMBAI – India’s central bank started a pilot programme of its digital currency on Tuesday, allowing select banks to use it for settling secondary market transactions in government securities.

Several lots of bonds were traded, with data from Clearing Corp of India showing that 7.38 per cent of 2027 debt and 7.26 per cent of 2032 bonds were among the first to change hands using the new form of currency. Nine banks are participating in the pilot.

The e-rupee is set to be tested for retail use in select locations within a month, the Reserve Bank of India (RBI) said on Monday. 

The limited roll-out comes a day after Singapore’s monetary authority unveiled trials of a digital version of its local dollar.

The central banks of China, the euro area, the Bahamas and others have been experimenting in the field, while many others are examining ways to quell the threat to financial stability from private digital currencies. 

“(The e-rupee) will provide users the same experience of dealing in currency in digital form, without any risks associated with private cryptocurrencies,” the RBI said earlier in a concept note.

Central bank digital currencies, while providing the benefits of virtual currencies, will also ensure consumer protection “by avoiding the damaging social and economic consequences of private virtual currencies”.

The banks that are involved in the pilot are State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and the Indian unit of HSBC Holdings. BLOOMBERG