The Reserve Bank of India (RBI) released its latest report detailing the development and roadmap ahead for the digital finance industry. Among several innovations that the RBI praised in this report, the mention of the eRupee central bank digital currency (CBDC) did not go unnoticed. Built like crypto but regulated by the RBI, India’s eRupee CBDC is currently under its advanced trial phase. The country’s apex bank, at this point, is looking at the eRupee to become a tool to improve India’s cross border transactions and take the INR to an international level.
The RBI has compiled its views on the ongoing trends that have been observed in the fintech sector. The report on currency and finance 2023-2024 addresses the eRupee, and says that the launch of the CBDC is aimed at brightening India’s projection of soft power.
“Crossborder digital trade policies and digitalisation, along with measures aimed at internationalising the Indian Rupee (INR) and the CBDC project, would play a crucial role in harnessing new opportunities, supporting seamless international transactions, reducing foreign exchange risks and managing global liquidity,” the report noted.
The RBI is presently exploring ways to have foreign direct investments (FDIs) make direct inroads into India’s fintech sector. Hence, the central bank intends to expand the adoption of fintech advancements such as the eRupee. RBI expects the inclusion of the CBDC into India’s financial system to elevate data security, availability of e-payment services, as well as boost local digital skills.
In May 2024, India was among the 36 countries globally with their respective CBDCs in the pilot stage, the central bank noted in its report.
CBDCs like the eRupee are virtual representation of fiat currencies like Rupee. They are supported on blockchain networks rather than on traditional servers. All transactions facilitated through a CBDC leave a permanent, unalterable record on the blockchain, which makes the financial system more transparent. The use of CBDCs can help banks around the world reduce their dependencies on paper notes, while also digitising the finance sector.
“As of June 2024, 50 lakh users and 4.2 lakh merchants were participating in the CBDC retail pilot,” the report further noted.
Presently, the eRupee is under trial in the retail and wholesale sectors for Person to Person (P2P) and Person to Merchant (P2M) transactions.
In conversation with Gadgets360, Sharat Chandra, Founder of EmpowerEdge Ventures, also weighed in on RBI’s outlook towards the eRupee CBDC.
“Establishing multi-CBDC bridges with nations that share strategic ties with India will significantly enhance the RBI’s objective of rupee internationalistion. Just as UPI is gaining global traction, the Digital Rupee operating on UPI infrastructure is poised to become a reality soon,” Chandra said.
