The Reserve Bank of India’s (RBI) retail central bank digital currency (CBDC) pilot has reached a significant milestone, with 5 million users and 420,000 participating merchants as of the end of June, RBI reported. This marks an 8.7% increase in user numbers and a 5% growth in merchants compared to the previous quarter.
New Functionalities for the Digital Rupee
The detailed report included numbers that demonstrated the addition of additional capabilities to the digital rupee, including programmability and offline functionality. These enhancements are essential for increasing the CBDC’s usefulness and appeal, especially in places with poor internet connectivity.
Three businesses—IDEMIA, Airtel Payments Bank, and HMD Global—started developing an offline digital rupee solution last year to serve the large segment of the Indian population that utilises feature phones but lacks internet connectivity.
Pilot projects utilising the programmability feature have also been implemented. For example, IndusInd Bank launched a project where farmers receive CBDC for recycling agricultural waste, subject to certain expenditure constraints. This quarter, non-bank payment operators were added to the list of institutional participants in the CBDC experiment, in addition to banks.
There have been allegations of a modest increase in the digital rupee’s acceptance despite these advancements. In 2023, the RBI set a goal of one million transactions per day, which it only met for a single day.
India on the Race of CBDCs
India is one of 36 nations that is actively testing CBDCs as of May 2024. These virtual currencies, which are managed by central banks, use blockchain technology to facilitate quick, safe, and transparent transactions. CBDCs have the power to change financial transactions and lessen dependency on cash.
Future predictions indicate that the digital rupee’s “killer app” may be cross-border payments. With a sizable diaspora, India is the country that receives the most remittances globally, with $120 billion in remittances in 2023. This characteristic has been highlighted as critical to the CBDC’s future performance by both the governor of the Reserve Bank of India and an executive from the Ministry of Finance.