India’s E-Rupee Hits 1 Mn Daily Transactions In December: Report

SUMMARY

The central bank digital currency (CBDC) which is called e-rupee, has been designed to be a digital alternative to physical cash

HDFC Bank, IDFC First Bank, Kotak Mahindra Bank, and IDBI Bank issued employee benefit-related amounts to the employees’ CBDC wallets

Currently, banks are offering incentives for e-rupee transactions following a nudge from the RBI

The Reserve Bank of India (RBI) has met its target of 1 Mn daily transactions by the end of 2023, propelled by disbursal of some employee benefits by lenders via digital rupee in December, Reuters reported, citing sources close to the matter.

The RBI started its e-rupee pilot in December 2022 but transactions averaged only 25,000 a day by the end of October, even though its use case was significantly broadened by linking it to the popular United Payments Interface (UPI), a framework that facilitates peer-to-peer money transfer via mobile apps.

The central bank digital currency (CBDC) which is called e-rupee, has been devised as a digital alternative to physical cash and was developed by using distributed-ledger technology.

However, some banks including HDFC Bank, IDFC First Bank, Kotak Mahindra Bank and IDBI Bank disbursed amounts related to employee benefit schemes directly to employees’ CBDC wallets, instead of their salary accounts, one of the sources mentioned above said.

The central bank expects non-financial firms to follow suit as well, helping boost transactions further, the source added.

Even the user base has been steadily growing … “to about 4 million users currently, up from 3 million in December,” the report further said.

Currently, banks are offering incentives for e-rupee transactions following a nudge from the RBI.

Last year in November, RBI was reported to be in talks with the US, Hong Kong and the Society for Worldwide Interbank Financial Telecommunications (SWIFT) to discuss fast and cost-effective cross-border transactions through digital currencies.

Also, the RBI was reported to be planning the introduction of its wholesale CBDC in the call money market. According to the reports, this would enable the use of digital currencies for interbank borrowing or call money market.

Other than the banks and financial institutions, digital currency has also ventured into the retail space with Reliance commencing to accept transactions through digital currencies.

Update | January 4, 21:00 IST | The article has been revised to exclude ICICI Bank’s name and now includes IDFC First Bank.