The Reserve Bank of India (RBI) on Tuesday said the first pilot for the retail digital rupee (e₹-R) would commence on December 1.

Eight banks have been identified for phase-wise participation in this pilot. The first phase will begin with four banks: State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank.

It will be done in four cities— Mumbai, New Delhi, Bangalore and Bhubaneswar.

Four more lenders comprising Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank will join the project.

The pilot would then be extended to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla.

A statement from the RB said that the scope of the pilot may be expanded gradually to include more banks, users and locations.

Announcing the operationalisation of the central bank digital currency — retail pilot, the RBI said the retail digital rupee would be in the form of a digital token that represents legal tender. It would be issued in the same denomination that paper currency and coins are currently issued.

“The pilot will test the robustness of the entire process of digital rupee creation, distribution, and retail usage in real time. Different features and applications of the e₹ -Rtoken and architecture will be tested in future pilots, based on the learnings from this pilot,’’ the RBI said.

It would be distributed through banks and users will be able to transact with the currency through a digital wallet offered by the participating banks and stored on mobile phones or devices.

Transactions that include both Person to Person (P2P)and Person to Merchant (P2M)can be done through the digital currency.

Besides, payments to merchants can be made using QR codes displayed at merchant locations.

For the user

■ Bank will issue digital token instead of paper currency

■ Digital token can be kept in a digital wallet app

■ Transaction can be done among those with digital wallets

■ Pilot with four banks and in four cities