Reserve Bank Governor Shaktikanta Das, in a keynote address at the G20 TechSprint Finale, says India is one of the few countries to have launched CBDC (central bank digital currency) pilots in both wholesale and retail segments, and that slowly and steadily, the pilot is being expanded to more banks, more cities, more people and more use cases.
He says the RBI is gathering empirical data that could go a long way in shaping the policies and future course of action. "With its instant settlement feature, I believe, CBDCs can play an important role in making cross-border payments cheaper, faster, and more secure," Das opines.
CBDC is a legal tender issued by the central bank in digital form. Like rupee notes or coins, which are in physical form. Like fiat currency, it can also be exchanged between people. Simply put, it's just like rupee (₹) notes but in digital form (e₹).
The central bank launched the first pilot of the retail digital currency, also known as e₹-R, on December 1, 2022, which represents legal tender and is issued in the same denominations as paper currency and coins. Initially, only four banks -- State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank -- in four cities have been allowed to offer e₹-R, but the scope is increasing gradually to include more banks, users, and locations.
People can get e₹-R from banks and make transactions via their digital wallets and the digital rupee can be stored on mobile phones or devices.
Das also aires his views about innovation in the Unified Payments Interface (UPI) space, which he says has been a game-changer for India's digital payments ecosystem. "It has helped drive financial inclusion by bringing millions of unbanked individuals into the formal financial system."
The RBI governor says with over 10 billion transactions a month, the UPI has become the "backbone" of digital payments in India. The payments system has helped catalyse a wave of innovations in the fintech sector, he adds. "Today, there are more than 70 mobile apps and more than 50 million merchants, who accept UPI payments."
Notably, in the latest development in the UPI space, the RBI has allowed the operation of pre-sanctioned credit lines at banks through the digital platform.
“Currently, savings account, overdraft account, prepaid wallets and credit cards can be linked to UPI. As announced, the scope of UPI is now being expanded by inclusion of credit lines as a funding account,” the RBI’s latest notification says. Under this, payments via a pre-sanctioned credit line issued by a Scheduled Commercial Bank to individuals, with prior consent of the individual customer, are enabled for transactions via the UPI system.
Under India’s G20 presidency, the fourth edition of G20 TechSprint was launched on May 4, 2023, with the theme ‘Technology solutions for cross-border payments’. "The issue of cross border payments is a G20 priority area. Notwithstanding the progress made so far, the key challenges to existing cross-border payments continue to be high cost, low speed, limited access, and insufficient transparency," says Das.
