The Reserve Bank of India (RBI) has launched a landmark initiative to modernize the country’s financial infrastructure by converting traditional bank deposits into digital tokens. This move, part of the RBI’s ongoing efforts to strengthen India’s digital banking ecosystem, aims to make transactions faster, safer, and more transparent.
On October 8, 2025, the RBI began a pilot project for deposit tokenization with select banks. The goal is to test how blockchain-based deposit tokens can improve the speed and security of banking transactions.
What is Deposit Tokenization?
Deposit tokenization is the process of transforming real-world financial assets, such as bank deposits, into secure digital tokens stored on a distributed ledger (blockchain).
These tokens mirror the value and characteristics of traditional deposits but can be transferred instantly and securely within the banking network.
Key Features of Deposit Tokens
- 1:1 Parity: Each token represents one unit of an actual deposit, maintaining full backing and redeemability.
- Interoperability: Tokens can be used across payment, transfer, and settlement systems.
- Transparency and Security: Blockchain records transactions permanently, preventing errors and duplication.
By representing deposits as digital tokens, the RBI is creating a bridge between conventional banking and blockchain-based finance.
Built on the CBDC Wholesale Framework
The RBI’s Central Bank Digital Currency (CBDC-Wholesale)—also called e₹-W—serves as the foundation for the pilot.
Why Use Wholesale CBDC?
The wholesale CBDC is designed for interbank settlements, such as clearing transactions in government securities markets. Using this framework allows the RBI to:
- Ensure Centralized Integrity: Tokenized deposits remain anchored to the central bank.
- Enhance Reliability and Security: Transactions benefit from the stability of central bank money.
- Enable Controlled Testing: The RBI can evaluate tokenized deposits in a secure environment before expanding to retail use.
Notably, Suvendu Pati, RBI’s Chief General Manager, confirmed that the tokenization of Certificates of Deposit (CDs) has also begun—marking an important step toward digitizing financial instruments using blockchain technology.
Benefits and Security Framework
The RBI’s deposit tokenization pilot could reshape India’s banking landscape by offering speed, transparency, and security.
Benefits for the Financial Ecosystem
- Faster Transactions: Interbank and intrabank transfers will become quicker and more efficient.
- Lower Costs: Reduced intermediaries will cut transaction costs.
- Enhanced Security: Immutable blockchain records protect against tampering and fraud.
- Greater Transparency: Digital records ensure auditability and accountability.
- Future Scope: Customers may eventually hold deposits, bonds, and investments as digital tokens.
Security and Regulation
The RBI has implemented strict security standards to ensure that risks remain controlled. The blockchain’s immutable ledger structure prevents unauthorized changes, while every transaction is traceable and verifiable.
However, the RBI emphasizes that robust legal and regulatory frameworks are essential for clarity on ownership rights and the enforceability of tokenized assets.
RBI’s Expanding Digital Footprint
Deposit tokenization differs from the Central Bank Digital Currency (CBDC). While CBDC is designed for public use, tokenized deposits function within the banking system to improve efficiency and settlement reliability.
This initiative builds upon the RBI’s earlier digital advancements:
- Wholesale CBDC Launch (Nov 2022): Enabled digital settlement of government securities.
- Retail CBDC Launch (Dec 2022): Facilitated person-to-person (P2P) and person-to-merchant (P2M) transactions in select cities.
By March 2024, retail CBDC usage surged from ₹6 crore to ₹234 crore, a 39-fold increase, showcasing growing trust in India’s digital financial systems.
Conclusion
The RBI Deposit Tokenization Pilot is a forward-looking step in India’s digital transformation journey. By combining the stability of central banking with the innovation of blockchain, the RBI aims to redefine how money moves across the financial system—ensuring speed, transparency, and systemic stability in the digital age.