The Reserve Bank of India (RBI) plans to introduce offline solutions to increase the adoption of the central bank’s digital currency (CBDC) – the digital rupee in remote areas of India. RBI aims to promote the adoption of CBDC in areas of the country that have limited internet access. The bank intends to evaluate various offline methods, such as proximity-based and non-proximity-based methods, to enable information exchange in challenging mountainous, rural, and urban environments. These actions aim to address internet access issues that hinder the adoption of the new digital currency.
During a Monetary Policy Committee meeting, RBI representatives discussed the new project and emphasized that the new features will be gradually introduced through pilot programs. The current CBDC system allows peer-to-peer (P2P) and peer-to-merchant (P2M) transactions using digital rupee wallets provided by pilot banks. The introduction of offline capabilities was proposed in March 2023 by the RBI executive director, who saw the potential of CBDC for cross-border transactions and integration with systems of other countries.
However, it is worth noting that existing payment platforms, such as the Unified Payments Interface (UPI), already offer offline features. Therefore, representatives from the Indian blockchain analytics firm, Crebaco, observe that the primary goal of CBDC is to improve monetary oversight and reduce cash usage. The past shows that in December 2022, RBI introduced a retail CBDC pilot program that reached a million daily transactions in December 2023.
The introduction of central bank digital currency is a trend in both developing and advanced economies. The motivation for such CBDC initiatives is to ensure financial stability and improve the efficiency of cross-border transactions. However, for developing economies, the main goal is also to improve financial inclusion through digital currency.
The introduction of offline solutions by RBI is crucial for the development of the digital rupee in India. This way, even people living in areas with limited internet access will have the opportunity to use CBDC. Improving financial inclusion is a strategic goal for RBI, and the introduction of CBDC is an important step in that direction. The Reserve Bank of India is aware of the challenges related to internet access in the country, which is why it aims to create solutions that are available to all. During the evaluation of various offline solutions, RBI considers both mountainous, rural, and urban environments to ensure that the digital rupee will be accessible to all citizens of the country.
The nationwide introduction of the digital currency involves technological and logistical challenges. RBI will continue to work on the development of the digital rupee, gradually introducing new features and pilot programs. The introduction of offline capabilities is another step in the development of CBDC in India and is an opportunity to improve the payment system and increase the accessibility of financial services for all citizens of the country. The digital rupee has the potential to accelerate the digital transformation of the country and strengthen India’s economy in the digital era.