The Reserve Bank of India (RBI) is actively working to expand the use of its Central Bank Digital Currency (CBDC) by developing an offline transfer capability. At the BIS Innovation Summit 2024, RBI Governor Shaktikanta Das highlighted the increase in retail transactions using India’s digital rupee (CBDC). He mentioned that although there has been progress, further initiatives are necessary to match the widespread adoption of the unified payments interface (UPI). The goal is to leverage the existing merchant infrastructure on the UPI to facilitate CBDC transactions and increase retail usage.
One of the key developments mentioned by Das is the introduction of an offline mode for CBDCs, which would enable people to make transactions even without internet access, similar to the convenience of cash transactions. He emphasized that CBDC will provide anonymity similar to cash and mentioned that this can be achieved through legislation or technology, such as the permanent deletion of transactions. Additionally, he clarified that India’s digital rupee is designed not to offer interest, which helps safeguard banks’ business models and mitigate the risk of bank disintermediation.
To improve the integration of fast-payment systems like UPI with the upcoming CBDC, the RBI is taking steps such as allowing a single QR code to work for both UPI and CBDC payments. This streamlines the acceptance process for businesses and responds to the demands of retail users. India has been at the forefront of experimenting with a CBDC, with its digital currency, the e-Rupee, gaining traction through a pilot program launched in Dec. 2022. Over 1.3 million customers and 300,000 merchants have participated in the program, circulating over 16 crore rupees ($1.2 million) by March 2023.
Despite the progress made in digital rupee adoption, the majority of usage (65%) is currently in the wholesale segment, with retail adoption at 35%. India’s RBI is among the majority (98%) of central banks worldwide actively exploring CBDCs through research, pilot programs, or implementation to enhance the functionality and accessibility of central bank money. The development of offline capabilities and the integration with existing payment systems like UPI are crucial steps in furthering the adoption of India’s digital rupee and encouraging retail usage.
The progress made by the RBI in expanding the use of the digital rupee demonstrates India’s commitment to exploring innovative solutions in the digital currency space. By addressing key issues such as anonymity, interest rates, and integration with existing payment systems, the RBI is working towards making the digital rupee a viable and accessible payment option for retail users in India. As more central banks around the world explore CBDCs, India’s proactive approach positions it as a frontrunner in the development and implementation of digital currencies.
