Wholesale CBDC (e₹-W)

Wholesale Central Bank Digital Currency, officially termed e₹-W, is the digital form of sovereign money issued by the central bank for use exclusively by regulated financial institutions. In India, e₹-W is designed to facilitate wholesale financial transactions such as interbank payments, settlement of government securities, and other large-value market operations. It represents a significant step in the evolution of India’s monetary and financial infrastructure, combining technological innovation with the traditional safety of central bank money.
Within the Indian banking and financial system, e₹-W is not intended for public use. Instead, it serves as a modern settlement asset that enhances efficiency, transparency, and risk management in the core layers of the financial system.

Concept and Meaning of e₹-W

e₹-W is a digital liability of the central bank, equivalent in value and legal status to physical currency and central bank reserves. It is issued and regulated solely by the Reserve Bank of India and can be held only by eligible institutions such as scheduled commercial banks and select financial market intermediaries.
The primary purpose of e₹-W is to enable faster and more secure settlement of wholesale transactions. By operating in a digital environment, it provides real-time or near real-time settlement with finality, reducing dependence on intermediaries and minimising settlement risks.

Background and Rationale in the Indian Context

India’s financial system has witnessed rapid growth in interbank transactions, government securities trading, and money market operations. Traditional settlement systems, while robust, involve multiple layers of reconciliation and time lags that can increase operational complexity and systemic risk.
The emergence of global discussions on central bank digital currencies, coupled with concerns over private digital currencies, prompted Indian policymakers to explore sovereign digital alternatives. e₹-W emerged as a targeted solution aimed at modernising wholesale financial infrastructure without altering the existing two-tier banking system.
The initiative aligns with India’s broader digital transformation strategy while safeguarding monetary sovereignty and financial stability.

Regulatory Authority and Institutional Framework

The Reserve Bank of India acts as the sole issuer, regulator, and overseer of e₹-W. It determines the design, scope, and operational rules governing its use. Participation is restricted to institutions that meet regulatory and prudential requirements, ensuring controlled and secure deployment.
e₹-W operates in a permissioned environment, meaning that access is limited and monitored. This approach balances innovation with strong regulatory oversight, a key consideration in a systemically important financial sector.

Operational Mechanism of e₹-W

Under the e₹-W framework, participating banks hold digital currency balances with the central bank in designated digital wallets or accounts. Transactions are recorded on a secure digital ledger, which may be based on distributed ledger technology or equivalent systems.
Key operational features include:

• Settlement in real time or near real time
• Finality of payment in central bank money
• Reduced settlement and counterparty risk
• Enhanced transparency and audit trails

e₹-W also supports delivery-versus-payment mechanisms, particularly useful for the settlement of government securities and repo transactions.

Role in Interbank Payments and Financial Markets

One of the most important applications of e₹-W is in interbank payments. By enabling instantaneous settlement in risk-free central bank money, e₹-W improves liquidity management and reduces reliance on end-of-day settlement cycles.
In financial markets, e₹-W enhances efficiency in:

• Government securities settlement
• Money market and repo operations
• Clearing and settlement processes

Shorter settlement cycles and improved certainty strengthen market confidence and reduce systemic vulnerabilities.

Impact on Banking Operations

For banks, e₹-W represents an advanced form of central bank reserves rather than a replacement of existing banking functions. It improves operational efficiency by automating settlement processes and reducing reconciliation costs.
Banks benefit through:

• Improved liquidity and collateral management
• Lower operational risk
• Faster settlement of high-value transactions

At the same time, banks must invest in digital infrastructure, cybersecurity, and staff capabilities to fully integrate e₹-W into their operations.

Implications for Monetary Policy and Financial Stability

e₹-W has important implications for monetary policy implementation. Faster and more precise settlement of interbank transactions strengthens the transmission of policy signals such as changes in policy rates and liquidity conditions.
From a financial stability perspective, e₹-W reduces systemic risk by ensuring that wholesale transactions are settled in central bank money with immediate finality. This is particularly valuable during periods of financial stress, when confidence in settlement systems is critical.

Distinction between e₹-W and Retail CBDC

e₹-W is fundamentally different from retail CBDC in terms of users and objectives. While retail CBDC is designed for public use in everyday payments, e₹-W is confined to institutional participants and focuses on efficiency and stability in the financial system’s backbone.
Both forms of CBDC are complementary. e₹-W strengthens wholesale settlement infrastructure, while retail CBDC addresses payment efficiency and financial inclusion at the consumer level.

Significance for the Indian Economy

In the broader Indian economy, e₹-W supports efficient capital allocation by enhancing the functioning of financial markets. A robust and modern settlement system enables banks and market participants to channel funds more effectively towards productive sectors such as infrastructure, industry, and government financing.
By reducing settlement risk and improving market efficiency, e₹-W indirectly benefits businesses and households through a more stable and resilient financial system. Its development also reinforces India’s position as a technologically advanced financial market within the global economy.