India’s CBDC may still be in its early innings, but the groundwork being laid in 2024 could determine its future trajectory.Source : Starline/Freepik
India has been at the forefront of digital payments innovation, with UPI revolutionising person-to-person and merchant transactions at scale. But as the world turns its attention to Central Bank Digital Currencies (CBDCs), India’s own initiative — the Digital Rupee — has re-entered the spotlight. While the pilot began in late 2022, it’s in 2024 that we’re seeing its second act unfold with greater intent and purpose.
The question is: Why now?
The Reserve Bank of India (RBI) launched the retail CBDC pilot (e₹-R) with the goal of exploring digital currency use among individuals and businesses. As of June 2024:
Still, these numbers don’t tell the full story. A series of strategic shifts in 2024 indicates that India is preparing to move beyond the pilot phase and into scaled use cases.
Several recent developments suggest a new direction for India’s CBDC program:
1. Offline CBDC Payments
One of the biggest hurdles in rural and remote areas is internet connectivity. The RBI is now piloting offline CBDC transactions, enabling feature phones and smart cards to conduct e₹ payments without a live data connection. This is a game-changer for financial inclusion.
2. CBDC for Government Transfers
Select government departments have started experimenting with using CBDC for employee reimbursements and direct benefit transfers (DBTs). Programmable disbursements can ensure that subsidies or benefits are spent for their intended purpose, increasing efficiency and accountability.
3. UPI Interoperability
To avoid creating parallel payment silos, the RBI is working toward CBDC-QR compatibility with UPI, allowing merchants to accept both e₹ and UPI payments using the same interface. This convergence of digital rails could be crucial for merchant adoption.
4. Programmable Payments and Smart Contracts
Some banks are piloting programmable use cases of e₹, where funds can be encoded to be used only for specific purposes, like school fees, groceries, or utility bills. These experiments could redefine how welfare, corporate reimbursements, and supply chain payments are managed.
Several global and domestic factors are influencing India’s renewed interest in the Digital Rupee:
India’s CBDC may still be in its early innings, but the groundwork being laid in 2024 could determine its future trajectory. Unlike UPI, which scaled rapidly due to private sector partnerships and ease of use, CBDC adoption will require careful calibration of privacy, programmability, and interoperability.
However, if done right, the Digital Rupee could:
In a world shifting toward tokenised money and programmable finance, India’s second act with the Digital Rupee is more than just a payment innovation — it’s a chance to lead the next era of digital public infrastructure.
(The author is the Global Head of Payments & Real World Assets, Polygon Labs)
