In December 2022, the RBI set a target to conduct daily transactions of 10 lakh CBDC by the end of 2023. To meet this target, an e-rupee pilot program was started by the RBI in December 2022. But RBI is lagging far behind in meeting the target set by it; currently, RBI's retail transactions are continuously decreasing. RBI's average retail transaction on a daily basis is only 25,000, which is much less than its set target. The RBI had set a target of 10 lakh CBDC transactions by the end of 2023. Many central banks came forward to meet the target of the RBI.
Indian banks came forward to help RBI meet its target: HDFC Bank, Yes Bank, and IDFC First Bank announced new incentives for CBDC transactions, such as reward points and cash back.
A wholesale Central Bank Digital Currency (CBDC) pilot program for inter-bank borrowing is being initiated by the RBI currently. The central bank had previously announced its plans to test a wholesale CBDC with a pilot program. The pilot program includes the names of nine major lending banks that are already part of the Government Securities (G-Sec) Pilot Program. These banks include the State Bank of India, Union Bank of India, Bank of Baroda, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and HSBC Bank.
Along with this, the RBI introduced a wholesale CBDC pilot in November 2022 for the settlement of transactions in the secondary government securities market. Currently, the RBI is actively working on different aspects of the digital rupee, including interoperability, so that almost all the users in India can easily connect digitally.
Furthermore, the aim of these pilot programs is also to analyze the behavior of the users, which will influence the design options and framework of CBDC. Apart from this, the primary target of these pilot programs is to make any individual financial transaction more convenient without putting it at any risk, so that the users can transact easily. Apart from the CBDC initiative, on August 17, the RBI launched a public technology platform for seamless credit. This platform has received a lot of appreciation from the landowners, and the landowners have also expressed their interest in it.
Currently, the RBI is actively working on various aspects of the digital rupee, including interoperability.
The RBI is also planning to introduce self-regulatory organization (SRO) norms for various regulated entities. These SRO norms are likely to be implemented by the end of 2023. Crypto-related regulations are on the horizon, and the RBI is approaching organizations in a phased manner to formulate crypto-related regulations, with the priority being the establishment of an SRO mechanism.
RBI's CBDC journey has been a mixed bag so far. On the one hand, RBI has been proactive in launching pilot programs and testing different aspects of CBDC. On the other hand, the RBI is lagging behind its target of 10 lakh CBDC transactions per day. This suggests that there is still a lot of work to be done to promote the use of CBDC among the masses.
The new incentives being offered by banks are a positive step in the right direction. However, it remains to be seen whether these incentives will be enough to attract and retain users in the long term. RBI needs to think of more innovative ways to promote the use of CBDC, such as developing new use cases and integrating CBDC with other digital payment platforms.
RBI's plan to introduce SRO norms for regulated entities is another positive step. This will help to create a more formal and structured regulatory framework for the crypto ecosystem, which will boost confidence among users and investors.
Overall, RBI's CBDC journey is still in its early stages. There are many challenges ahead, but RBI is taking steps in the right direction. It will be interesting to see how RBI's CBDC evolves in the coming years.
Also Read- RBI Deputy Governor: AI and Blockchain Vital for Bank Growth
