Indian central bank in ‘no hurry’ to rollout CBDC nationwide

India's cautious CBDC strategy focuses on financial stability as Reserve Bank assesses long-term impacts of e-rupee.

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The Reserve Bank of India (RBI) is adopting a cautious approach to the nationwide rollout of its Central Bank Digital Currency (CBDC), the e-rupee, prioritizing financial stability and a thorough understanding of its potential impacts.

Deputy Governor T. Rabi Sankar emphasized that the bank is “in no hurry to roll it out immediately,” indicating a deliberate strategy to assess outcomes before broader implementation, Bloomberg News reported on Nov. 20.

Evaluating long-term impact

The e-rupee pilot, launched in December 2022, has made steady but modest progress, amassing over 5 million users and facilitating roughly 1 million retail transactions by mid-2024. Despite these numbers, Sankar highlighted the importance of evaluating the long-term impact before scaling up.

He said during a conference in Cebu, Philippines:

“Once we have clarity on the outcomes and potential effects, we will take the next steps.”

The Reserve Bank’s deliberate approach reflects concerns about how CBDCs could disrupt traditional banking. Deputy Governor Michael Debabrata Patra previously noted that CBDCs might attract depositors during financial instability, posing risks to banks by encouraging mass withdrawals.

To mitigate such challenges, the central bank has limited its CBDC rollout to controlled experiments. Local banks participating in the pilot, such as ICICI Bank and State Bank of India, have introduced incentives like salary disbursements via e-rupee to encourage adoption.

Despite the reservations, regulators in the country have previously stated that they prefer a nationwide CBDC over private digital currencies like Bitcoin.

Evolving features

India is also enhancing the e-rupee’s functionality, including developing offline transfer capabilities to boost accessibility. Governor Shaktikanta Das acknowledged, however, that adoption remains far from the levels achieved by the Unified Payments Interface (UPI), India’s leading digital payments platform.

The wholesale e-rupee program has focused on interbank transactions and government securities trading, with nine major financial institutions participating. These trials aim to refine the currency’s operational design and identify key use cases.

India’s approach mirrors the global trajectory of CBDC development. According to the Atlantic Council, over 130 nations are actively exploring digital currencies, with countries like China and Nigeria already advancing their CBDC programs.

As India observes international developments, its central bank remains committed to ensuring that the e-rupee strengthens the financial system without compromising stability.