India’s eRupee CBDC, which is currently in an advanced trial period, is reportedly facing a decline in terms of its usage. Citing sources familiar with the matter, the Reuters report claims that CBDC transactions, which reached one million transactions per day in December 2023, have fallen to only around 100,000 per day so far. However, neither the finance ministry nor the Reserve Bank of India (RBI) have accepted or denied the Reuters report.
What is causing the eRupee to fall?
eRupee CBDC is being developed and tested by RBI. In 2023, when the CBDC reached the advanced trial stage, the banks assisting the RBI in the eRupee trials decided to be creative in promoting its use among their individual and retail customers.
In January 2024, more banks operating in India began disbursing funds linked to employee benefit schemes — directly to employees’ CBDC wallets, instead of to their salary accounts. The aim of this move was to increase the availability and usage of eRupee. Banks that have practiced this include HDFC, Kotak Mahindra Bank, Axis Bank, Canara Bank and IDFC First Bank.
According to a Reuters report, these banks have now withdrawn this initiative leading to a decline in the use of eRupee. “The lack of organic demand for the use of e-rupees is obvious,” sources familiar with the matter were quoted as saying in the report.
What is the current status of eRupee?
RBI had last year directed banks to push the use of eRupee to test the flexibility of this system. At the time, Sharat Chandra, co-founder of the India Blockchain Forum, said that “compensating employees who use CBDC is a good step.” However, in May this year, reports of a decline in eRupee’s wholesale circulation hit the headlines.
While banks no longer distribute salaries among employees in the form of eRupees, the RBI has hinted at its future plans to increase the use of CBDC among the masses. For example, Apex Bank recently said it will start circulating the digital rupee through non-banking payment system operators – like Google Pay and PhonePe. Although this plan was talked about in May, the CBDC option has not yet been rolled out in these UPI payment apps.
The RBI also wants to add an offline payment feature to make it usable by those in areas with poor internet connectivity.
Efforts are underway to make CBDC compatible with existing UPI QR codes, providing people with a familiar method of using eRupee for daily transactions. Currently, CBDC is not yet widespread in India and it remains uncertain when the future of this technology will become clear.
CBDC or Central Bank Digital Currency is a virtual representation of fiat currency, supported on the blockchain instead of traditional servers. CBDC has several elements reminiscent of cryptocurrencies such as fast transaction speed, enhanced privacy and maintenance of permanent transaction records. However, unlike cryptocurrencies, CBDCs are issued and regulated by central banks.
India launched its CBDC with a trial phase starting in November 2022. Since then, eRupee has been continuously tested in retail environments.
