India's Digital Rupee Pilot Progresses to Next Stage

India is set to advance its digital rupee pilot by incorporating programmability and offline payment capacity. This development comes as part of India’s ongoing testing of a retail Central Bank Digital Currency (CBDC) which began early last year.

Successful CBDC Testing

The testing phase of India’s digital currency has been fruitful, recently reaching a significant milestone of a million transactions per day. These transactions have been between individuals and between customers and merchants.

Incorporation of Programmability

The Reserve Bank of India (RBI) intends to enhance the digital rupee with programmability, which would enable transactions for specific, targeted purposes. RBI officials provided an example of this feature in a recent press conference, indicating how a business could program expenditures for particular needs like employee business travel.

A question about the potential impact on fungibility, the ability for a currency to be interchangeable, was addressed by deputy governor, T Rabi Sankar. He explained that while the digital currency may not be fungible for a period, it regains its fungibility once received by the store, using the example of a school granting a student money specifically to purchase books.

Offline Functionality Testing

Recognizing the need for the digital rupee to function in areas with poor or limited internet connectivity, the RBI will also conduct tests on the currency’s offline functionality. The bank plans to carry out several pilot tests in varied locations, including regions with challenging terrain like mountains.

The progression of the digital rupee pilot signifies India’s commitment to digital currency, demonstrating the nation’s intent to remain at the forefront of evolving financial technology.