RBI Sets Out To Increase E-rupee Payments With Help Of UPI Infra
The Reserve Bank has set an ambitious goal to increase daily CBDC transactions from up to 10,000 to 10 lakh (one million) by the end of the year, according to a leading media house. To achieve this, the central bank plans to utilise UPI QR codes.
The e-rupee, introduced by the RBI for retail transactions on a pilot basis on 1 December 2022, has been downloaded by approximately 13 lakh users as of June, with around 3 lakh merchants accepting CBDC payments.
To promote the CBDC, the RBI has instructed banks to make UPI QR codes interoperable for e-rupee payments. This allows for the benefits of both cash anonymity and digital transaction convenience.
The limited number of merchants accepting CBDC has hindered transaction growth thus far. However, RBI Deputy Governor T Rabi Sankar stated at an Indian Banks' Association conference that enabling interoperability would allow any merchant accepting UPI payments to also accept CBDC. This eliminates concerns about merchant onboarding.
Based on available data, 13 banks that have been authorised to handle CBDC have successfully attained partial interoperability, allowing QR codes to be scanned and connected to CBDC wallets whenever they are accessible.
Sankar mentioned that the target of 10 lakh CBDC payments is not excessively high considering the 31 crore UPI transactions. Nonetheless, it is significant enough to gauge the implications.
Sankar also stated that CBDC does not compete with existing systems like UPI, so there won't be any incentives for CBDC transactions. He emphasised that the survival of any payment system depends on the value proposition it offers users.
Furthermore, the deputy governor identified two use cases for digital currency: removing friction in cross-border transactions and programming the currency for specific purposes. He also highlighted the need for a domestic digital currency to counter the threat of stablecoins, which are cryptocurrencies tied to the value of fiat currencies.
Sankar mentioned that many institutions, including the Bank for International Settlements (BIS), are exploring CBDCs to address cost and time inefficiencies in cross-border transactions.
