The Reserve Bank of India (RBI) has reportedly decided to conduct a trial by depositing compensation contributions to its officers’ digital currency wallets.
According to a local media reportthe central bank has chosen to deposit part of the emission rights that it repays the central bank’s digital currency (CBDC) wallets for its officials. The move is expected to boost the popularity of the digital rupee which has struggled to gain mass adoption in the face of tough competition from digital payment applications.
According to one International Monetary Fund (IMF) reportSince December 2023, several banks in India have started disbursing employee benefits using e-rupee wallets instead of salary accounts, helping RBI reach its goal of one million daily transactions. This was part of efforts to increase the adoption of the e-rupee, following the RBI’s encouragement for banks to use CBDC for compensation.
By December 2023, the central bank had reached one million daily transactions for its retail CBDC pilot, bolstered by user incentives and bank employee salaries paid in e-rupees. But by June, daily transactions had dropped to about 100,000, according to a Reuters reports.
In March 2024, RBI Governor Shaktikanta Das will be appointed said that India had around 4.3 million retail CBDC users, while another 400,000 merchants also used e-rupees.
“CBDC is (an) area where RBI among central banks is a pioneer. Almost every central bank is talking about, or they are experimenting, or they are discussing about CBDC. But (the) actual launch of a pilot project has been done by very few. As I see it CBDC has huge potential in the future, in fact it is the future of currency,” Das said in December.
In November, Das said the RBI is still experimenting with new ones e-rupee use cases but has not set a target date for the full-fledged launch of the digital currency.
According to the IMF report, the digital rupee pilot in India has yet to achieve mainstream adoption, especially in the presence of the widely adopted Unified Payments Interface (UPI). While India struggling to gain public support for its e-rupee, UPI has seen one tenfold increase in volume over the past four years, from 12.5 billion transactions in 2019-2020 to 131 billion transactions in 2023-2024, or 80% of all digital payment volumes.
“As of May 2024, the e-rupee in circulation stood at 3.23 billion rupees, up from 1 billion rupees in December 2023. However, this is still a small fraction of the 35.4 trillion rupees in notes currently in circulation “, says the IMF report. .
Linking the e-rupee to UPI has expanded its use, according to the IMF report.
“While the number of (CBDC) transactions has peaked at 1 million per day, we still see preference for UPI among retail users. We certainly hope this will change going forward,” Das said in May 2024.
“We have leveraged the existing merchant infrastructure on UPI to facilitate CBDC transactions. We have also enabled interoperability between CBDC and UPI,” Das added.
RBI started its first digital rupee pilot in the wholesale segment on 1 November 2022 to regulate transactions on the secondary market with government securities. It started the pilot project with nine banks – State Bank of India (NASDAQ: SBKFF), Bank of Baroda, Union Bank of India, HDFC Bank (NASDAQ: HDB), ICICI Bank (NASDAQ: IBN), Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC (NASDAQ: HSBC).
The retail digital rupee pilot started on December 1, 2022, and users could make transactions through a digital wallet offered by the participating banks and stored on mobile phones or devices.
RBI’s Innovation Hub is planning a digital trial of unsecured loans for contract employees
RBI Innovation Hub (RBIH), a wholly-owned subsidiary of the central bank, has reportedly teamed up with fintech firm VIVIFI India Finance for a pilot project to provide unsecured digital loans to freelancers or contract workers such as taxi and food delivery drivers.
According to a reports local mediaThe initiative uses alternative data for loan guarantees and seeks to bring contract workers into formal banking systems. Future plans also mean that the system is connected Unified Lending Interface (ULI).
ULI was designed and developed by RBIH. Launched as a pilot program in August 2023, RBI’s ULI is expected to completely change credit provision in the country. It is a technology platform built to facilitate access to authenticated data from various sources through a standardized Application Programming Interface (API) to which all lenders can connect seamlessly through a plug-and-play model.
Founded in 2016VIVIFI India Finance Private Limited is a Non-Banking Finance Company (NBFC) registered with RBI. Last year, the fintech company raised $75 million in Series B financing through a combination of debt and equity from US-based investors.
Watch: India to be a leader in digitization
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