India’s digital rupee, or central bank digital currency eRupee (CBDC), is currently in advanced testing phase with the help of 16 national banks. eRupee has managed to garner five million users in the pilot phase, RBI Governor Shaktikanta Das claimed on Monday. Das was addressing a conference in Bengaluru when he said the RBI is not in a hurry to implement CBDC in the country’s financial systems and wants to do so only after conducting a thorough investigation.
The CBDC retail pilot was launched in December 2022 to facilitate peer-to-peer transactions. Currently, eRupee is being tested for offline functionality and programmability features, which are important features, according to Das.
Elaborating on this thought, the RBI Governor said that the programmability of eRupee could prove to be a key enabler for financial inclusion in India.
“Tenant farmers often find it difficult to get agricultural credit for inputs and raw materials as they do not have land titles to present to banks. However, programming of end use for purchase of agricultural inputs can give banks the required comfort and thus establish the identity of the farmer not through his land holding but through the end use of the funds disbursed,” the RBI governor explained.
With the programmability of CBDC, he added, farmers will be eligible to get targeted funds for generating carbon credits. Other features in the pipeline for eRupee include implementing an anonymity layer for transactions and launching CBDC in offline ecosystems.
A 16-page transcript of Das’s speech is being shared with members of the Indian fintech community via networking platforms such as LinkedIn.
While the RBI continues to oversee cryptocurrencies, it believes that eRupe, which will have cryptocurrency features, is the future of payment systems for domestic and international transactions.
CBDC is a virtual representation of fiat currencies on blockchain networks. Transactions processed through CBDCs, such as eRupee in India, eCNY in China, and eNaira in Nigeria, will not only be permanently recorded but will also maintain immutability of records. This would provide greater transparency to financial systems and help central banks around the world reduce their dependence on paper notes. Unlike cryptocurrencies, CBDCs are issued and monitored by central banks.
A Reuters report earlier this month said UPI apps like Google Pay and PhonePe are considering participating in India’s CBDC trials under the auspices of the RBI.
The RBI itself, in its recent report, had said that it was considering using eRupees as a tool to streamline cross-border transactions in India and give the INR an international profile.
