The eRupee or Central Bank Digital Currency (CBDC) of the Reserve Bank of India (RBI) is currently in an advanced testing phase with several national banks helping the RBI to roll out the digital currency. According to RBI data, the use of eRupee in the retail sector increased over the past year. On the other hand, the use of eRupee in the wholesale sector has seen a noticeable decline. At the moment, the exact reason for this observation remains unclear.
Details of eRupee CBDC circulations disclosed by RBI
An Economic Times report citing RBI data indicates that from fiscal year 2024, about Rs. 234 million eRupees have been reported to have been used. Around the same month last year, this figure was Rs. 6 million In the wholesale sector, CBDCs are worth Rs. 8 lakh has been utilized in March, which is noticeably lower than last year's expenditure of Rs. 10.6 million.
A CBDC is a digital representation of a fiat currency, supported by blockchain networks instead of traditional servers. The digital currency has several elements similar to cryptocurrencies, such as fast transactional speed, enhanced privacy, and maintenance of permanent transactional records. Unlike cryptocurrencies, however, CBDCs are issued and regulated by central banks.
In a recent announcement, the RBI said it planned to start circulating the digital rupee through non-banking payment system operators. So far, India's CBDC distribution has been entirely dependent on banks. However, going forward, the RBI is likely to allow platforms like Google Pay and PhonePe to distribute the digital rupee to the retail ecosystem.
RBI working on offline payments for eRupee CBDC
The RBI is also looking at adding an offline payments feature to make it usable for those in areas with poor internet connectivity.
Currently, Indians are making use of the UPI payment method to process instant peer-to-peer transactions by simply scanning QR codes. The use of QR codes has eliminated the need for merchants and customers to share their numbers with each other, prioritizing privacy.
Meanwhile, the central bank is working to make the eRupee CBDC compatible with existing QR codes in India. This would open up options for people to use the eRupee without having to go through additional steps to access the CBDC.
