India’s journey towards adopting a Central Bank Digital Currency (CBDC) has taken significant strides, with the Reserve Bank of India (RBI) setting ambitious targets for its under-trial digital currency, the eRupee. The RBI aims to achieve one million daily transactions of the eRupee by December, as it seeks to accelerate the adoption of digital currency in the country’s financial ecosystem.
The eRupee initiative has been in progress for over two years, and last year, India introduced its first-ever national digital currency in pilot mode for testing. Initially, Indian banks expressed skepticism about the limited use cases for eRupee, given the already widely-used Unified Payments Interface (UPI) system for digital transactions. However, the RBI is now taking a proactive approach, directing banks to facilitate a minimum number of transactions using the CBDC, ensuring selected users can conduct daily purchases with the eRupee.
Several prominent state-owned and private banks, including State Bank of India, Bank of Baroda, ICICI Bank, HDFC Bank, Kotak Mahindra Bank, and Yes Bank, are actively participating in the ongoing CBDC trials alongside the RBI. As part of the efforts to encourage banks’ active promotion and integration of digital currency, they will be eligible for rewards approved by the government once they meet their assigned eRupee transaction targets.
Central Bank Digital Currencies, like India’s eRupee, function similarly to cryptocurrencies but are regulated and issued by central banks. The eRupee not only enhances online payment systems but also aims to reduce reliance on physical cash notes, driving the country towards a more digital and cashless economy.
One of the notable features of the ongoing eRupee trials is its capability to interact with existing Unified Payments Interface (UPI) QR codes in India. This integration will allow test users to process payments using the digital currency by simply scanning the widely-used QR codes, making the adoption of eRupee seamless for consumers and merchants.
The Reserve Bank of India’s ambitious goals for the eRupee align with a global trend of central banks exploring and developing their own CBDCs. A survey conducted by the Bank for International Settlements (BIS) revealed that nearly two dozen central banks across emerging and advanced economies are expected to have digital currencies in circulation by the end of the decade. This growing interest in CBDCs signifies their potential impact on global financial systems and indicates the transformative changes underway in the world of digital currencies.
India’s eRupee has already seen promising results, with 1.3 million customers and 0.3 million merchants engaging in CBDC transactions as of June 2023, according to RBI Deputy Governor T Rabi Sankar.