RBI Monetary Policy: CBDC-UPI Interoperability In Pipeline, 1 Million Digital Rupee Customers Expected By End Of June

However, an official date for CBDC's public rollout across the country has not been announced yet.

RBI said that the scope of CBDC is being expanded gradually to include more banks and locations.

Digital Rupee, the central bank digital currency (CBDC) that was introduced by the Reserve Bank of India (RBI) in December 2022, will now be streamlined to work with Unified Payments Interface (UPI) as well. During the press meet following the Monetary Policy Committee (MPC) announcements on Thursday, RBI Deputy Governor T Rabi Sankar said that the central bank is working to enable customers to make payments using CBDCs via UPI. He added that the interoperability will be facilitated via UPI QR codes, as is the case with regular payments. 

Sankar also added that the RBI expects to see one million customers using Digital Rupee by the end of June. However, he didn't mention an official date for CBDC's public rollout across the country.

Late last month, RBI said that the scope of CBDC is being expanded gradually to include more banks and locations.

The pilot phase of the Digital Rupee - Wholesale segment was initiated on November 1, 2022. Subsequently, the pilot for the retail digital rupee was announced on December 1, 2022.

The retail digital rupee offers the characteristics of physical cash, such as trust, safety, and finality of settlement, in a digital format. It can be held and utilized for transactions, similar to how physical currency notes are used, as stated in the Reserve Bank of India's annual report.

The initial pilot was launched in Mumbai, New Delhi, Bengaluru, and Bhubaneswar, involving participating customers and merchants within a closed user group (CUG). Additional locations, including Ahmedabad, Chandigarh, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla, are being gradually included in the pilot.

Initially, the pilot involved four banks: State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. Subsequently, four more banks joined the pilot: Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank. Furthermore, five additional banks, namely Punjab National Bank, Canara Bank, Federal Bank, Axis Bank, and IndusInd Bank, are in the process of joining the pilot. The scope of the pilot is expanding progressively to include more banks, users, and locations as required.

According to the report, the results of both pilots have been satisfactory and aligned with expectations.

Regarding the Digital Rupee - Wholesale Segment, the report highlights its use case in the settlement of secondary market transactions in government securities (G-secs). The utilization of the Digital Rupee - Wholesale Segment is expected to enhance the efficiency of the inter-bank market. Settlement in central bank money would decrease transaction costs by eliminating the need for settlement guarantee infrastructure or collateral to mitigate settlement risk.

Nine banks, namely State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and HSBC, are participating in this pilot.

The introduction of the Central Bank Digital Currency (CBDC) is anticipated to improve the efficiency of the interbank market, and settlements in e-rupee can reduce transaction costs by preemptively addressing the necessity for settlement guarantee infrastructure or collateral to mitigate settlement risk.

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