India’s Reserve Bank (RBI) is taking a careful and calculated approach to the implementation of its Central Bank Digital Currency (CBDC), known as the e-rupee. While acknowledging the transformative potential of CBDCs in the financial sector, the RBI emphasizes the importance of fully understanding the implications and effects of this technology before any widespread deployment.
Measured Approach to CBDC Expansion
According to a recent Bloomberg report, RBI Deputy Governor T. Rabi Sankar reinforced that the central bank is prioritizing patience in its CBDC strategy. This means that there is no strict deadline for the nationwide rollout of the e-rupee, as the RBI seeks to evaluate the outcomes of initial implementations before further expansion.
The e-rupee was introduced in December 2022 as part of India’s experimentation with digital currencies. However, adoption has progressed slowly, with approximately 1 million retail transactions recorded by mid-2024. To encouragehigher usage, local banks have initiated incentives such as utilizing the CBDC for salary disbursements. Nonetheless, Sankar made it clear that the RBI will not rush the rollout. “We are in no hurry to roll it out immediately. Once we have some visibility of what the outcome or impact will be, we’ll roll it out,” he stated during a conference in Cebu, Philippines.
This cautious approach is also driven by concerns regarding CBDCs’ potential effects on financial stability. In August, another Deputy Governor, Michael Debabrata Patra, expressed concerns that CBDCs could act as “safe havens” during financial crises, potentially resulting in increased withdrawals from traditional bank deposits and creating risks of bank runs. This scenario underscores the complexities involved in integrating CBDCs into India’s existing banking framework.
Growing Usage of the e-Rupee and Future Plans
Despite the gradual adoption of the e-rupee, there are signs of growing interest in this digital currency. By mid-2024, over 5 million users had participated in the e-rupee pilot program, showcasing a burgeoning acceptance of digital currencies. The RBI is also focused on enhancing the e-rupee’s capabilities, including developing offline transfer functionality to improve accessibility for users.
Governor Shaktikanta Das has acknowledged the rise in retail transactions involving the digital rupee, but he also noted that further advancements are necessary to reach the level of success demonstrated by India’s Unified Payments Interface (UPI), which has become a cornerstone of digital transactions in the country.
CBDC Pilots and Global Trends
In addition to the retail initiative, the RBI has been conducting a wholesale CBDC pilot involving nine major banks, including ICICI Bank, HDFC Bank, and State Bank of India. This pilot primarily focuses on interbank transactions and trading of government securities, aimed at refining the operational efficiency of the digital currency within India’s financial ecosystem.
India’s cautious approach to CBDCs is reflective of a broader global trend, where more than 130 countries—representing nearly 98% of the world’s GDP—are actively exploring or developing digital currencies, as reported by the Atlantic Council. Countries like China, Jamaica, and Nigeria are making significant strides in CBDC advancements. In light of this, India is closely monitoring global developments while steadily progressing with its own digital currency initiative.