RBI’s retail digital currency pilot recorded Rs 5.70 crore of transactions

The retail central bank digital currency (CBDC) pilot was started on December 1, 2022.

The Reserve Bank of India’s pilot retail digital currency programme recorded transactions worth Rs 5.70 crore in the first four months, a right to information (RTI) report filed by Moneycontrol showed.

“As per the data published in the balance sheet of the Reserve Bank of India as on March 31, 2023, the E-Rupee issued for CBDC (Retail) at Rs 5.70 crore,” the RBI said in a response to the query on January 16.

The retail central bank digital currency (CBDC) pilot was started on December 1, 2022. The government proposed to introduce the digital rupee, using blockchain and other technologies, to boost the digital economy and lead to a more efficient and cheaper currency management system, finance minister Nirmala Sitharaman said in her budget speech on February 1, 2022.

The pilot covered select locations in a closed user group of customers and merchants. The e₹-R (e-rupee-retail) would be in the form of a digital token that represents legal tender and would be issued in denominations that paper currency and coins are currently issued, the RBI said on November 29, 2022.

The first phase of the pilot involved four banks in four cities – State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank in Mumbai, New Delhi, Bengaluru and Bhubaneswar. Later, the pilot was extended to four more banks – Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank and new cities – Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla.

A slow start?

A few days after the launch of the pilot, experts said that retail CBDC may be off to a shaky start given the dominance of the Unified Payments Interface (UPI) in the digital payments space. UPI is an online platform that enables instant fund transfers between bank accounts.

Sharat Chandra, co-founder of India Blockchain Forum, a crypto and digital currency forum, said the widespread adoption and user-friendly nature of UPI made it difficult for users to accept an alternative digital currency.

Also read: Retail CBDC’s penetration in the digital payments market may be slow, not steady, experts say

“Switching to alternative real-time payments with CBDC requires a significant behavioural change, which naturally takes time,” Chandra said.
He also said that digital payment users need compelling reasons to switch from existing payment methods but added that CBDC offers use-cases that could enhance transaction services. The RBI now plans to introduce programmability so that digital currency payments can be made for specified purposes and limits can be set for validity periods and geographical usage.

“Currently, there's a dearth of such use-cases that offer clear advantages over conventional methods like UPI. The programmability of digital rupee presents numerous use-cases that could enhance financial services and transactions,” Chandra said.

But banks are ambitious

SBI, the country’s largest bank, and Bank of Baroda are aiming to scale up their user base in their retail CBDC projects.

“The pilot has been a success. We have 4 lakh CBDC users now as the largest bank in the country. The target is 10 lakh users by December,” Balaji Rajagopalan, chief technology officer of SBI, said in Mumbai on November 23.

Also read: RBI meets target as December 27 saw more than 1 million CBDC transactions

Joydeep Dutta Roy, then executive director at Bank of Baroda, said: “We have around 2.5 lakh users, and we are working to make 10 lakh users over the next 3-4 months.”

Moneycontrol reported on January 1, 2024, that the RBI met its target of hitting a million daily transactions in the retail CBDC pilot by the end of 2023.

"We also made significant strides in usage of the e-rupee (CBDC) and exceeded the milestone of 1 million transactions in a day on December 27, 2023," RBI governor Shaktikanta Das said in a letter to RBI staff on December 29.

Chandra added that banks need to invest more for the widespread adoption of retail CBDC.

“Integrating CBDC seamlessly with existing payment systems and allied ecosystems is a complex and time-consuming process and complete integration is crucial for widespread adoption but requires significant effort and investment,” Chandra added.