On May 30, the Reserve Bank of India (RBI) released its Annual Report 2022-23 and also discussed the prospects. According to the report, the RBI decided to move towards digitalization of the economy after the Union budget of India 2022-23 talked about how India could embrace digitization in the payment system.
The Reserve Bank of India released its central bank digital currency (CBDC) pilot program Digital Rupee (e₹) in different phases which was launched on 1 November 2022. The initial phase was available for wholesale as well as retail access. India has emerged as stronger and more resilient against the Covid 19 pandemic due to digital transformation steps taken by the Central Bank. According to the RBI, digital transactions saw a significant increase in recent years. In volume and value terms, total digital payments increased by 57.8% and 19.2%, respectively, in 2022–23, following increases of 63.8% and 23.1%, the year before.
Also, India has left behind many other nations in terms of real-time transactions at the international level with a 46% share in 2022. Digital transformation could be seen as a new force of development in India with almost every shopkeeper, and vendor using a Unified Payment Interface (UPI). Additionally, the Aadhar Payment Bridge System (APBS) with the cooperation of Automated Clearing Houses performs digital transactions in rural and semi-urban areas.
In the report, the RBI presented its plans for CBDCs in 2023-24 to expand its ongoing pilot projects CBDC retail, and CBDC wholesale by including more features. The pilot in CBDC-Retail is proposed to be expanded to more locations and to include more participating banks. For those who are not aware, currently, India’s CBDC program is limited to a few cities. The RBI also clarified the difference between both versions of CBDCs retail and wholesale.
In its Annual Report, it mentioned that on November 1, 2022, the Digital Rupee – Wholesale Segment (e₹-W) officially started. The settlement of secondary market transactions in government securities (G-secs) is the use case for this pilot project. And, for the Retail Digital Rupee (e₹-R) was announced on December 1, 2022. e₹-R offers features of physical cash like trust, safety, and settlement finality in digital mode. The first phase of CBDC was labeled as Utkarsh and the upcoming phase will be called Utkarsh 2.0. It will be interesting to see the upcoming developments in the Indian digital ecosystem and growth in e₹ adoption.
