The Reserve Bank of India (RBI) is actively considering new functionalities for its retail central bank digital currency (CBDC) to encourage greater adoption among Indian residents.
According to a report by Reuters, six individuals with knowledge of the matter have confirmed RBI’s efforts to position the digital rupee as a competitive payment alternative. The top priority for RBI is the integration of offline payments into the digital rupee, a move aimed at expanding financial inclusion.
While specific technical details about the offline payment functionality are limited, RBI may include contactless payment options using near-field communication (NFC) technology.
HDFC Bank in India is reportedly collaborating with technology firm IDEMIA to develop technical solutions supporting offline CBDC payments for specific mobile devices.
Additionally, RBI aims to link the digital rupee with the Unified Payments Interface (UPI), a real-time payment system in India that facilitates fund transfers between multiple banks. The central bank is considering integration using QR codes, with YES Bank leading the way among Indian lenders.
Integrating with UPI is expected to offer several benefits to the digital rupee, including allowing users to make payments from a single platform. With more than 300 million UPI users and merchants, experts anticipate a surge in CBDC adoption through this integration.
However, some argue that UPI’s dominance could continue to overshadow the digital rupee unless Indian banking regulators introduce ambitious initiatives to attract new users.
RBI is also exploring the potential for the digital rupee to improve cross-border payments. RBI’s Head, Shaktikanta Das, confirmed discussions with several Southeast Asian countries and the United Arab Emirates (UAE) about using CBDCs in cross-border transactions.
RBI had initially set a target of achieving 1 million digital rupee transactions per day by the end of the year. However, after approximately three months into the retail pilot, daily digital rupee transactions are currently around 18,000. The proposed enhancements are expected to play a significant role in helping the central bank approach its target.
“As new features get added, a gradual pickup in retail CBDC transaction volumes will follow,” noted Akhil Handa, an executive at Bank of Baroda.
