At the recent Business Standard BFSI Insight Summit, RBI Governor Shaktikanta Das explained the Indian central bank’s thinking about the digital rupee. “We never intended that from day one we will go for a nationwide roll out or anything like that because, after all, we are dealing with currency,” he said. “The safety, security and the robustness of the design and the security aspect is very important.”
“There are learnings every day with regard to design features, with regard to the possible use cases. So we are on a learning curve. We are in no great hurry; there’s no target date,” he added.
The RBI highlights its estimation of 5 million digital rupee users. Yet considering India has more than 1.4 billion people, then less than ½ of 1% of the population is not a significant adoption rate – especially for something that has such strong government backing.
When considering the digital rupee’s prospects, it is crucial to remember the context in which the project was developed. Several years ago, the RBI was concerned about threats to its sovereignty posed by cryptocurrency. It observed how China launched the digital renminbi while simultaneously cracking down on crypto. The RBI thus reasoned that a digital fiat currency could increase financial inclusion while reasserting the monetary sovereignty of the central bank.
However, it is unclear if India’s financial authorities sufficiently considered the question of demand. Existing digital payments infrastructure in the subcontinent is comprehensive. The state-run Unified Payments Interface (UPI) system is extraordinarily successful. UPI dominated India’s retail payments in 2023-24, accounting for 80% of their volume, according to the RBI. Since 2019-20, the platform’s number of transactions has grown exponentially from 12.5 billion to 131 billion.
If India’s financial regulators remain committed to rolling out a CBDC, it might be in their interest to turn their attention to a wholesale version. Financial institutions could conceivably find more practical use cases for a digital rupee than the broader public.
Yet thus far, India has not dedicated substantial resources to the wholesale segment. Pilot projects involving secondary market transactions for government bonds and interbank lending in the call money markets do not seem to have been especially fruitful.