RBI Governor Suggests Offline Initiatives to Drive Digital Rupee Adoption in Remote Areas

Reserve Bank of India (RBI) Governor Shaktikanta Das has suggested using offline solutions to boost the adoption of the central bank’s digital rupee in remote areas.

The RBI will evaluate various offline solutions, including proximity and non-proximity-based options, in hilly, rural, and urban environments to address this challenge, as reported by the Press Trust of India.

“It is proposed to introduce offline functionality in CBDC-R to enable transactions in areas with poor or limited internet connectivity,” Governor Das said during a review meeting of the Monetary Policy Committee on February 8.

“These functionalities will be slowly introduced through the pilots.”

Digital Rupee Facilitates P2P and P2M Transactions

The RBI’s digital rupee system currently facilitates person-to-person (P2P) and person-to-merchant (P2M) transactions using digital rupee wallets provided by pilot banks.

The introduction of offline capabilities is part of the RBI’s efforts to enhance the digital rupee’s usability and accessibility.

The idea of launching offline capabilities for the digital rupee was initially proposed in March 2023 by Ajay Kumar Choudhary, the RBI’s executive director.

At that time, Choudhary mentioned the central bank’s interest in testing the CBDC’s potential for cross-border transactions and its integration with legacy systems in other countries.

🇮🇳 India's CBDC pilot update!

Beyond P2P & P2M, expect:

✅ Programmability, Targeted payments (welfare,
travel)
✅ Offline e-rupee use
✅ Usage limits & geo-restrictions
More use cases, more convenience! #CBDC #DigitalRupee )@VersanAljarrah https://t.co/GnaghkAO0x

— Shreyanss (@shreyans437) February 8, 2024

While the digital rupee is being tested for offline functionality, existing payment platforms, such as the widely used Unified Payments Interface (UPI), already offer offline capabilities.

Siddharth Sogani, CEO of Indian blockchain analytic firm Crebaco, noted that CBDCs primarily aim to enhance monetary monitoring and reduce cash usage, aligning with the government’s vision of a cashless society.

“We already have popular payment services with offline capabilities, especially UPI. The CBDCs align with the government’s vision to eliminate cash. Although CBDCs are an alternate solution, the primary purpose is to have a well-monitored monetary system.”

India Intensifies Push for CBDC

The RBI initiated a pilot of its retail CBDC in December 2022, successfully achieving its target of one million daily transactions by December 2023.

More recently, the central bank has been exploring tech solutions for privacy concerns of its CBDC. 

“A privacy legislation is not the only way. Other ways to tackle this problem – particularly technology – do exist, and our team is exploring that,” an officer reportedly said.

The development of CBDCs in both developing and advanced economies has found increasing momentum, driven by motivations such as financial stability and cross-border payment efficiency.

However, developing countries particularly aim to enhance financial inclusion through the adoption of CBDCs.

As per data by the American think tank Atlantic Council, a total of 11 countries have launched a digital currency, which includes countries like The Bahamas, China, Nigeria, and Jamaica, among others.

Notably, 105 countries, representing over 95% of global GDP, are exploring a national digital currency.

In comparison, only 35 countries were considering a CBDC by May 2020. Moreover, a total of 50 countries are in an advanced phase of exploration (either development, pilot, or launch).