Use of India's CBDC declines, but central bank presses ahead

Work to make the digital rupee programmable has begun

India's Reserve Bank deputy governor has revealed that transaction volumes using the nation's central bank digital currency (CBDC) have trended downwards since December 2023 – and may even have been inflated by one-off uses of the currency.

In that month – around one year into the pilot – the number of digital rupee transactions hit the Reserve Bank's (RBI) goal of a million CBDC transactions each day.

The pace did not keep up, however, as the total number of transactions using the e-rupee stands at 22 million, revealed deputy governor T Rabi Sankar.

Speaking at a press conference last Friday to review the RBI's most recent decisions, Sankar moved effortlessly between English and Hindi, and conceded "Volumes [of CBDC transactions] have not been the same, they have come down," according to local media proficient in both languages.

Transaction rates in December 2023 were helped by Indian banks disbursing employee benefits as digital rupees.

The million-transaction mark was also achieved thanks in part to enablement of interoperability with an unnamed – but "very popular" – Unified Payments Interface (UPI) platform, conceded Sankar.

According to the RBI exec, 4.6 million users and 400,000 merchants have tried India's digital currency. Growing numbers of merchants are considering using it, Sankar added, which has seen peer-to-merchant transactions account for an increasing share of all CBDC transactions in the country.

"The CBDC pilots are currently in operation, with increasing number of use-cases and participating banks," revealed RBI. The bank has proposed to expand use of retail CBDCs by enabling non-bank payment system operators to offer CBDC wallets.

These operators would presumably include third-party app providers like Google Pay, and major India payment app company PhonePe.

CBDCs are a digital form of fiat currency and are being tested around the world. India's trials have focused on both wholesale and retail transactions.

Another announcement from the RBI last week saw the bank propose permitting the use of third-party UPI payments from Prepaid Payment Instruments (PPIs).

In February, RBI announced it would enable programmable features and offline capability in its digital currency.

On Friday, local media interpreted Sankar's press conference comments as indicating work on programmability is under way. He cited a use case where a farmer transferred money designed specifically for buying agriculture-related items.

Offline CBDC usage is still being tested, and will launch at a later date, explained Sankar.

India's Universal Payments Interface is rapidly becoming one of the world's more prominent payments schemes, with the government promoting its use as a means of luring tourists and speeding cross-border payments. If India's CBDC takes off at home, it too could become a model for other banks around the world. ®