Wholesale CBDC

Wholesale Central Bank Digital Currency (Wholesale CBDC) refers to a digital form of central bank money designed for use by regulated financial institutions rather than the general public. Unlike retail CBDC, which is intended for everyday transactions by individuals and businesses, wholesale CBDC is restricted to banks and select financial intermediaries for large-value and interbank transactions. In India, wholesale CBDC represents a strategic innovation aimed at enhancing the efficiency, safety, and resilience of the financial system.
Within the banking and financial architecture, wholesale CBDC is viewed as an advanced settlement instrument that modernises core market infrastructure while preserving the central role of the central bank in issuing sovereign money.

Concept and Meaning of Wholesale CBDC

Wholesale CBDC is a digital liability of the central bank made available to financial institutions for settlement of interbank payments, securities transactions, and other wholesale financial operations. It performs functions similar to traditional central bank reserves but uses distributed ledger technology or other advanced digital platforms.
The key objective of wholesale CBDC is to improve settlement efficiency, reduce counterparty risk, and enable near real-time finality in high-value transactions. As it represents risk-free central bank money, it maintains the highest level of trust within the financial system.

Evolution of CBDC Thinking in India

The discussion on CBDCs in India emerged from global debates on digital currencies, payment innovation, and declining cash usage. While private cryptocurrencies raised concerns about monetary sovereignty and financial stability, central banks worldwide began exploring sovereign digital alternatives.
In India, policy attention initially focused on strengthening digital payments infrastructure. As payment volumes grew and financial markets became more complex, the case for a wholesale CBDC gained prominence as a means to modernise interbank settlement and market infrastructure under regulatory oversight.
The initiative aligns with broader digital transformation goals while maintaining strong centralised control over money issuance.

Role of the Central Bank and Regulatory Oversight

The design, issuance, and regulation of wholesale CBDC in India fall under the authority of the Reserve Bank of India. The RBI acts as the sole issuer of CBDC and determines eligibility criteria for participating institutions.
Wholesale CBDC operates within a controlled environment, typically involving:

• Scheduled commercial banks
• Clearing corporations
• Financial market infrastructures

Regulatory oversight ensures that wholesale CBDC complements, rather than disrupts, existing systems such as the real-time gross settlement framework.

Operational Mechanism in the Banking System

In a wholesale CBDC system, participating banks hold digital currency balances directly with the central bank. These balances are used to settle interbank obligations, securities trades, and other wholesale transactions.
Key operational features include:

• Real-time or near real-time settlement
• Delivery-versus-payment mechanisms for securities
• Reduced settlement cycles
• Enhanced transparency and auditability

By enabling programmable settlement conditions, wholesale CBDC can automate complex financial transactions and reduce operational friction.

Significance for Interbank Payments and Financial Markets

Wholesale CBDC has particular relevance for interbank payments, government securities settlement, and money market operations. Traditional settlement systems often involve multiple intermediaries and end-of-day reconciliation, which can introduce delays and risks.
The use of wholesale CBDC can:

• Minimise settlement and counterparty risk
• Improve liquidity management for banks
• Enhance efficiency in bond and repo markets
• Support faster transmission of monetary policy

These benefits strengthen the overall functioning of financial markets.

Impact on Banking Operations

For banks, wholesale CBDC represents an evolution rather than a replacement of existing reserve accounts. It offers a more technologically advanced form of settlement asset while preserving the two-tier banking system.
Banks may benefit from:

• Lower operational and reconciliation costs
• Improved collateral management
• Greater certainty in settlement finality

At the same time, participation requires investment in technology, cybersecurity, and staff capabilities, making readiness and scalability key considerations.

Implications for Monetary Policy and Financial Stability

Wholesale CBDC can enhance the effectiveness of monetary policy implementation. By improving the speed and precision of interbank settlements, it strengthens the transmission of policy signals such as changes in interest rates and liquidity conditions.
From a financial stability perspective, wholesale CBDC reduces systemic risk by ensuring that large-value transactions are settled in central bank money with immediate finality. This is particularly important during periods of market stress when confidence and liquidity are critical.

Relevance to the Indian Economy

In the broader Indian economy, wholesale CBDC supports efficient financial intermediation, which is essential for economic growth. A robust settlement infrastructure enables banks and financial markets to allocate capital more effectively across sectors such as infrastructure, industry, and government finance.
By modernising core financial plumbing, wholesale CBDC indirectly benefits businesses and households through more stable and efficient financial services. It also reinforces India’s position as a technologically advanced and resilient financial system in the global economy.

Relationship with Retail CBDC and Existing Systems

Wholesale CBDC is distinct from retail CBDC in terms of users, objectives, and design. While retail CBDC focuses on payments and financial inclusion, wholesale CBDC targets efficiency and stability in financial markets.
It is designed to coexist with existing settlement systems rather than abruptly replace them. Gradual adoption allows regulators and market participants to assess risks, interoperability, and long-term benefits.