India Pilots Tokenized Deposits to Modernize Banking Efficiency

India's Reserve Bank (RBI) is set to launch a pilot program for deposit tokenization on October 8, 2025, leveraging its wholesale Central Bank Digital Currency (CBDC) as the settlement infrastructure. This initiative, announced by RBI Chief General Manager Suvendu Pati, aims to enhance transaction efficiency, reduce systemic friction, and modernize India's financial system through blockchain technology. The pilot builds on earlier CBDC phases, including a retail CBDC for person-to-person and merchant payments launched in December 2022 and a wholesale CBDC for institutional settlements initiated in November 2022, both of which have seen significant adoption growth The Reserve Bank of India (RBI) to Launch Pilot for Tokenized Deposits^[1].

Deposit tokenization involves representing traditional bank deposits as digital tokens on a blockchain, ensuring a 1:1 backing by real-world funds. When a customer deposits money with a participating bank, the institution issues corresponding tokens on the blockchain, allowing seamless transfer or trading while maintaining the custodial integrity of the underlying assets. The wholesale CBDC, known as e₹-W, serves as the foundational layer, anchoring token movements with the finality of central bank money India’s Central Bank to Pilot Deposit Tokenization Using Its CBDC^[2]. This approach is designed to test faster, cheaper, and more secure interbank settlements, with potential applications extending to money market instruments like commercial papers.

The RBI emphasized the importance of regulatory guardrails to ensure enforceability and legal equivalence between tokenized deposits and conventional deposits. Pati highlighted that risks associated with tokenization are manageable with proper oversight, though challenges such as technical integration with legacy banking systems and maintaining user trust remain critical. The pilot will involve collaboration with select banks, operating in a controlled environment to evaluate scalability and compliance The Reserve Bank of India (RBI) to Launch Pilot for Tokenized Deposits^[1].

This move positions India as a potential global leader in CBDC innovation. If successful, the pilot could reshape banking operations by enabling real-time liquidity management and fostering new financial instruments. The initiative also aligns with broader global trends, such as the European Union's MiCA framework and the U.S. GENIUS Act, which seek to standardize crypto regulations. Unlike these frameworks, India's approach prioritizes controlled experimentation over broad legislative mandates, reflecting its cautious yet forward-looking strategy Indian Central Bank to Launch Pilot for Deposit Tokenisation, Official Says^[3].

The RBI's focus on deposit tokenization underscores its commitment to modernizing India's financial infrastructure while distinguishing itself from unregulated crypto assets. By anchoring digital tokens to central bank-issued CBDCs, the initiative avoids the volatility and lack of backing associated with private cryptocurrencies. This strategic differentiation aligns with the RBI's broader stance against unbacked digital assets, which it has previously criticized for systemic risks.

As the pilot progresses, the RBI will monitor technical, legal, and institutional challenges, including security protocols, fraud prevention, and seamless integration with existing banking systems. Success could catalyze India's transition to a tokenized financial ecosystem, setting a precedent for other economies. The outcomes of this experiment will be closely watched by global regulators and financial institutions seeking models for balancing innovation with stability.