MUMBAI, September 11 – The Reserve Bank of India (RBI) is actively working alongside financial institutions to introduce new features aimed at promoting the adoption of the central bank digital currency (CBDC), known as the e-rupee, according to sources familiar with the matter.
Despite initial expectations, retail CBDC transactions currently average around 18,000 per day, falling significantly short of the RBI’s ambitious target of one million daily transactions by the end of 2023.
Among the proposed features is the ability for customers to conduct digital rupee transactions even when offline, as well as establishing a connection between the e-rupee and India’s widely used Unified Payments Interface (UPI). Three individuals with knowledge of the matter disclosed these developments.
UPI serves as an instant real-time payments system that allows users to transfer funds across various banks without the need to disclose their bank account details.
The sources requested anonymity since they are not authorized to communicate with the media. As of the time of this report, the RBI had not responded to an email seeking comments.
According to two of the bankers quoted above, the RBI has been encouraging banks to make the e-rupee interoperable with UPI through the use of a QR code.
Interoperability via the UPI QR code will facilitate payments through the already widely distributed UPI QR codes, they explained.
The initiative, initially announced in June, has already been activated by prominent banks, including the State Bank of India, the country’s largest lender.
Sharat Chandra, co-founder of India Blockchain Forum, an industry collective, commented on this development, saying, “Interoperability of UPI QR Code with digital rupee will remove friction… but this will not drive adoption unless CBDC payments are incentivized.”
Furthermore, the RBI and banks are reportedly exploring ways to enable the use of the e-rupee for transactions when both the customer and the merchant are offline, according to two sources involved in a pilot project.
However, it is important to note that while the RBI is reviewing various technology proposals, it has not yet approved any of them, according to a source familiar with the matter.
Top private lender HDFC Bank is reportedly collaborating with technology firm IDEMIA to create a version of offline CBDC transactions specifically designed for feature phones, as outlined by two individuals familiar with the plans.
HDFC Bank declined to comment on this matter.
Akhil Handa, a senior executive at Bank of Baroda, emphasized that CBDC’s new and unique use cases, including its offline functionality, would facilitate transactions even without network connectivity. He added, “As new features get added, a gradual pickup in retail CBDC transaction volumes will follow.”
