CBDC Serves No Special Purpose As UPI Use Already Prevalent: Ex-RBI Dy Guv

Former Reserve Bank of India (RBI) deputy governor SS Mundra is reportedly not bullish about the success of the homegrown central bank digital currency (CBDC) E-Rupee. 

Speaking at an event in Kolkata, Mundra said that CBDCs do not serve any special purpose owing to the high traction of unified payments interface (UPI), ET reported. 

“If we talk about CBDC vis-a-vis UPI, usage of UPI is already prevalent and I don’t see that CBDC serves any special purpose… It’s good to have one (CBDC) though,” Mundra was quoted as saying by the said publication. 

He also called on the banks to “sit up and reimagine” their business models as fintech startups with greater digital capabilities were flooding the market. He, however, said that a collaboration between the two could be a win-win proposition.

Called the E-Rupee, India’s CBDC leverages distributed-ledger technology and has been envisaged as a digital alternative to physical cash. But concerns such as data privacy and cybersecurity remain as key roadblocks to full-fledged rollout. 

The former central bank deputy governor’s comments come at a time when the RBI has pulled all stops to popularise the usage of Digital Rupee and make the CBDC accessible to a wider segment of retail users. 

The RBI first began piloting the CBDC for retail users in December 2022 and achieved the target of 10 Lakh transactions a day a year later in December 2023. By April 2024, a total of 2.2 Cr transactions were processed.

Besides, the CBDC trial run is also currently being carried out in the government securities market and the interbank call money market. Going forward, the central bank also plans to pilot the offerings for commercial papers and certificates of deposits for wholesale CBDC users.

In May this year, RBI governor Shaktikanta Das said that the central bank was working on introducing functionalities such as offline capability, programmability and other value-added features for CBDCs. 

On the other hand, UPI continues to see widespread traction on the back of growing penetration of smartphones and affordable internet. As per government data, the payments network clocked 1,444 Cr transactions worth INR 20.64 Lakh in July 2024, up 3.95% and 2.8% month-on-month (MoM), respectively.

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