The Reserve Bank of India (RBI) continues to test the central bank digital currency (CBDC). Sixteen local banks already joined the project, and the number of retail users of the digital rupee hit 5 million.
Speaking at a conference on digital infrastructure and emerging technologies, Shri Shaktikanta Das, Governor of the Reserve Bank of India (RBI), highlighted the success of the central bank digital currency (CBDC) pilot project, during which retail and wholesale scenarios are being tested.
According to Das, the CBDC is so far used by 5 million retail users in India. The RBI governor stressed that the RBI isn’t yet ready for a full-scale rollout of the digital rupee as it’s not fully understood how the CBDC will impact users, monetary policy, and the economy.
Das also revealed that 16 local banks are already participating in the digital rupee pilot. The pilot is focused on using the CBDC for payments, including offline transactions and programmable payments. The RBI is actively exploring the digital rupee’s potential in supporting local farmers who have difficulties accessing loans. The CBDC can simplify the preparation of loan documents and enable farmers to participate in the carbon credit market.
The RBI governor also talked about the potential of using CBDCs for cross-border payments. In particular, he emphasized that seamless international transactions with digital government currencies will only be possible if traditional payment systems and CBDCs of different countries are compatible with each other. The actual implementation of interoperability, according to Das, will pose a number of challenges and require certain compromises. However, the RBI governor is confident that technical barriers can be overcome through the creation and use of international technical standards, which in turn will contribute to the long-term sustainability of the global financial system.
The RBI started exploring the possibilities of CBDCs in 2022, when the digital rupee pilot project was launched. By the end of the year, eight local banks joined the pilot. In 2023, the RBI tested the CBDC for compatibility with the UAE’s digital national currency, partnered with 18 countries on the possibility of using the digital rupee in cross-border trade transactions, and connected the CBDC to the UPI national payment system. The Reserve Bank of India is exploring options to introduce offline payments this year.
