RBI seeks to push e-rupee payments using UPI infra

NEW DELHI: In an ambitious target for e-rupee payments, the RBI is looking to boost daily central bank digital currency (CBDC) transactions to 10 lakh from up to 10,000 by the year-end by using UPI QR codes. Banks have been tasked with promoting the CBDC by making UPI QR codes interoperable for accepting payments using e-rupee.

E-rupee payments have the anonymity feature of cash with the convenience of digital transactions. Transactions are yet to pick up mainly because of the limited number of merchants accepting CBDC payments. The RBI had launched the e-rupee for retail transactions on a pilot basis on December 1, 2022. As of June, about 13 lakh users have downloaded the CBDC wallet and around 3 lakh merchants are accepting CBDC payments.

RBI deputy governor T Rabi Sankar said that interoperability would enable anymerchant accepting UPI payments to also accept CBDC, eliminating concerns about the number of merchants onboarded. He was speaking at a conference organised by the Indian Banks’ Association.

He said that the 13 banks allowed to deal with CBDC had achieved partial interoperability, where QR codes can be scanned and linked to CBDC wallets if available. “Work is in progress to ensure full interoperability by the end of the month, allowing QR codes without linkedCBDC accounts to redirect payments to bank accounts. The RBI also aims to encourage other banks to adopt interoperability,” he said.

Sankar said the 10 lakh target for CBDC payments was not too high considering that UPI transactions stand at 31 crore. At the same time, he said it was large enough to get an idea of the implications.

The deputy governor ruled out any incentives for CBDC transactions as it does not compete with existing systems like UPI. “Any payment system’s survival depends on the value proposition it offers users,” he said.

He also listed removing friction in cross-border transactions and programming the currency for specific purposes as two use cases for digital currency. He added that there was a need for a domestic digital currency to counter the stablecoin threat. Stablecoins are cryptocurrencies pegged to the value of fiat currencies like the dollar.

“We should ideally aim for a global financial system which rests on central bank digital currencies (CBDCs) issued by each country to settle global payments, and not rely on stablecoins,” Sankar said, adding that stablecoins pose an existential threat to policy sovereignty.

Sankar said that many institutions, including the Bank for International Settlements (BIS), are exploring CBDCs to address cost and time inefficiencies in cross border transactions.