The Reserve Bank of India (RBI) has released its latest report detailing the evolution and roadmap for the digital financial sector. Among the various innovations that the RBI lauded in the report, the mention of the eRupee central bank digital currency (CBDC) did not go unnoticed. Built as a crypto but regulated by the RBI, India’s eRupee CBDC is currently in its advanced testing phase. The country’s premier bank is currently considering the eRupee as a tool to enhance India’s cross-border transactions and take the INR to an international level.
The RBI has compiled its views on the ongoing trends observed in the fintech sector. report on Currency and Finance 2023-2024 talks about the eRupee and says the launch of the CBDC is aimed at clarifying India’s soft power forecast.
“Cross-border digital trade policies and digitalisation, along with measures aimed at internationalisation of the Indian Rupee (INR) and the CBDC project, would play a crucial role in capitalising on new opportunities, supporting seamless international transactions, mitigating exchange rate risks and managing global liquidity,” the report noted.
The RBI is currently exploring ways to directly infuse foreign direct investment (FDI) into India’s fintech sector. To this end, the central bank plans to expand the adoption of fintech developments such as the eRupee. RBI expects that the incorporation of the CBDC into India’s financial system will improve data security, availability of e-payment services and local digital skills.
As of May 2024, India was among 36 countries globally that had their CBDCs in the pilot phase, the central bank said in its report.
CBDCs like the eRupee are virtual representations of fiat currencies like the Rupee. They are supported on blockchain networks instead of traditional servers. All transactions facilitated through a CBDC leave a permanent, immutable record on the blockchain, making the financial system more transparent. The use of CBDCs can help banks around the world reduce their reliance on paper banknotes while also digitizing the financial sector.
“As of June 2024, 50 lakh users and 4.2 lakh merchants participated in the CBDC retail pilot,” the report said further noted.
Currently, the eRupee is being tested in retail and wholesale for person-to-person (P2P) and person-to-merchant (P2M) transactions.
Speaking to Gadgets360, Sharat Chandra, Founder, EmpowerEdge Ventures, also commented on the RBI’s outlook on the eRupee CBDC.
“Establishing multi-CBDC bridges with countries sharing strategic ties with India will significantly strengthen the RBI’s objective of rupee internationalisation. Just as UPI is gaining popularity globally, the digital rupee running on UPI infrastructure is poised to become a reality soon,” Chandra said.
