The Reserve Bank of India (RBI), in an effort to expand the usage of the Central Bank Digital Currency (CBDC), has now proposed to allow distribution of CBDCs through Non-bank Payment System Operators.
CBDC pilots in the Retail and Wholesale segments are underway with more use-cases and more participating banks. While the number of retail CBDC users is 4.3 million, the number of merchants using CBDC is 4 million. The CBDC Retail (CBDC-R) pilot currently allows for Person to Person (P2P) and Person to Merchant (P2M) transactions using Digital Rupee wallets provided by selected banks.
The RBI, continuing with this approach, has now proposed to make CBDC-Retail accessible to a broader segment of users in a sustained manner, by enabling non-bank payment system operators to offer CBDC wallets. “This is expected to enhance access and expand choices available to users apart from testing the resiliency of the CBDC platform to handle multi-channel transactions. Necessary changes will be made to the system to facilitate this,” said RBI governor Shaktikanta Das in the Statement on Developmental and Regulatory Policies.
At present, the pilot is operational across 13 banks including State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. Later Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank were included.
CBDC, also known as Digital Rupee or e₹, is a digital version of physical currency, offering trust, safety, and easy settlement like cash. However, it doesn’t earn interest and can be converted into other forms of money. The RBI creates and distributes CBDC tokens to Token Service Providers (TSPs), who then distribute them to users for transactions, similar to physical cash.
Earlier this year, RBI had earlier added programmability and offline functionality to the digital currency as part of the CBDC pilot program for better reach and connectivity to areas with poor internet connectivity. This would allow government agencies to ensure payments are made for specific benefits, while letting companies allocate funds for expenses such as business travel. RBI had said that these functionalities will be introduced in a phased manner to expand the participation of more banks, users, and locations.
