In the advancing race of central bank digital currencies (CBDCs), India is striving hard to establish itself at a significant position. Now, progressing on their vision, the Reserve Bank of India (RBI) has asked India’s leading banks to step up their efforts to ensure their customers adopt the digital Rupee and transactions grow.
Additionally, the central bank has been implementing a system of assigning business targets to banks for promoting initiatives like the CBDC and the recovery of unclaimed deposits. Reportedly, bankers said the regulator is constantly monitoring actions of lenders to meet the targets.
For instance, RBI has given a target to generate one million daily digital transactions by December. The central bank’s target comes despite bankers’ saying benefits of the CBDC are limited, considering the popularity of the Unified Payments Interface (UPI) platform in the country.
According to local media reports, in mid-July, RBI deputy governor T. Rabi Sankar asked banks to prepare for one million transactions a day for CBDC by the end of the year. He added that this will give RBI enough data to study the impact of CBDC on the financial system.
Sources reveal as of June 30, more than a million users as well as 262,000 merchants had registered for the pilot on retail CBDC transactions. It is crystal clear that the RBI wants to ensure Indians adopt and transact in the Digital Rupee.
Additionally, the Indian central administration, in association with the RBI, has been trying to create a digital ecosystem that is backed by a centralized, distributed, non-fungible digital Rupee. The CBDC pilot marks a near two year of initiation as the RBI had first launched the wholesale digital Rupee pilot followed by the retail pilot in February this year.
The pilot which began in 2022 involved four national banks and subsequently expanded to nine more banks. Currently, the State Bank of India, Bank of Baroda, ICICI Bank, HDFC Bank, Kotak Mahindra Bank, and Yes Bank, are participating in the ongoing CBDC trials.
Although the initial trials have been successful, leading Indian banks have reportedly claimed that the e-Rupee CBDC could have only limited use cases. So far, banks have successfully facilitated several large-volume transactions using the Digital Rupee.
It is worth noting that India’s ambition has escalating swiftly. Recently, the Indian finance minister announced that the pilot program had more than 15.8 million digital Rupees in circulation as of February 28, 2023.
However, Indians have wholeheartedly adopted UPI (Unified Payments Interface), and there are several apps that offer instant payments and receipts. Still, Indian banks will now have to coax banking customers to process e-Rupee tractions for daily purchases.
Considering the India’s large population and the significant challenges it brings to table including the digital divide, the government has also comsidered the idea of offline CBDC and the potential challenges to it.
Notably, RBI is trying to incorporate the wildly popular QR code into Digital Rupee transactions, thereby bringing ease of payments and receipts. It is possible the RBI has asked banks to promote the use of QR codes and suggest its customers try the same. This could ensure seamless onboarding of the general citizenry into the CBDC trials.