The Reserve Bank of India (RBI) is working to expand the use of its central bank digital currency (CBDC) by actively developing offline transfer capabilities.
As The Economic Times reported Monday , RBI Governor Shaktikanta Das highlighted the growth of retail transactions using the digital Indian rupee (CBDC) at the BIS Innovation Summit 2024 .
However, he acknowledged the need for further initiatives corresponding to the widespread adoption of the Unified Payments Interface (UPI).
“We have leveraged the existing merchant infrastructure in UPI to facilitate CBDC transactions,” – Das said. “Although the number of transactions has peaked at 1 million per day, we still see a preference for UPI among retail users. We certainly hope that this will change in the future.”
Combining UPI with CBDC for retail use
An offline mode for CBDC would allow people to make transactions even without Internet access, mimicking a key advantage of cash. The governor also confirmed that CBDC would provide anonymity similar to cash.
“Anonymity can be solved through legislation and/or technology. For example, by permanently removing transactions. That could be one method. The basic principle is that CBDC can have the same degree of anonymity as cash. No more and no less.” – he concluded.
Das also assured the public that the digital Indian rupee was designed not to offer interest, unlike traditional bank deposits. He explained that this safeguards the banks’ business models.
“This feature should reduce the potential risk of withdrawal from the bank’s intermediary.” – he stated.
He also said the RBI is working on linking fast payment systems, such as UPI, with the upcoming CBDC to respond to calls from retail users.
One of the steps the bank is taking is to enable a single QR code for both UPI and CBDC payments, which will streamline the acceptance process for businesses.
The digital rupee is booming
India is one of the few leaders in experimenting with CBDCs, while developed countries are taking a more cautious approach.
The country is expanding the use of its digital currency, e-rupee, in a pilot program launched in December 2022. To date, more than 1.3 million customers and 300,000 merchants have participated.
By March 2023, more than 16 crore rupees($1.2 million) were in circulation. However, the majority (65%) is currently used in the wholesale segment, with retail sales at 35%.
India’s RBI is among the vast majority (98%) of the world’s central banks actively exploring CBDCs through research, pilot programs or implementation. Their goal is to improve the functionality and availability of central bank money.
