The Reserve Bank of India Working on New Features to Boost Adoption of Central Bank Digital Currency

The Reserve Bank of India (RBI) is collaborating with financial institutions to introduce new features to promote the adoption of its central bank digital currency (CBDC), also known as the e-rupee. However, current retail CBDC transactions are falling short of the RBI’s target of one million transactions per day the end of 2023.

Among the proposed features is the ability to conduct digital rupee transactions offline, as well as linking the e-rupee to India’s popular Unified Payments Interface (UPI). UPI is an instant real-time payment system that allows users to transfer money across multiple banks without revealing their bank account details.

The RBI has been pushing for the e-rupee to be made interoperable with UPI using a QR code. This would enable payments to be made through the widely distributed UPI QR codes. Implementation of this facility has already been initiated major banks, including the State Bank of India.

However, industry experts believe that the adoption of CBDC payments will require additional incentives beyond the convenience of interoperability. Sharat Chandra, co-founder of the India Blockchain Forum, emphasizes the need for incentivizing CBDC transactions to drive adoption.

In addition to offline transactions, the RBI and banks are also exploring ways to allow the use of the e-rupee between customers and merchants even when they are offline. While technology proposals are being examined, the RBI has not yet approved any of them.

Private lender HDFC Bank is working with a technology firm called IDEMIA to develop offline CBDC transactions specifically designed for feature phones.

The introduction of new features and use cases, such as offline transactions, is expected to encourage the adoption of retail CBDC transactions. As these features are implemented, an increase in transaction volumes is anticipated.

Sources:
– Reuters