A push by Indian banks to pay some employee benefits through the e-rupee in December helped the country’s central bank meet its target of conducting one million daily transactions using the digital currency.
Some large private and state-run Indian lenders disbursed amounts related to employee benefit schemes directly to employees’ CBDC wallets, instead of their salary accounts, a source familiar with the pilot said.
These lenders included HDFC Bank, Kotak Mahindra Bank, Axis Bank, Canara Bank and IDFC First Bank, another source directly familiar with the development said.
The central bank digital currency (CBDC) has been devised as a digital alternative to physical cash and has been built using distributed-ledger technology.
Globally, countries including China, France and Ghana are in the pilot stages of their CBDC projects. Others like Nigeria have rolled out their digital currency, but with limited success despite offering rewards like discounts on auto-rickshaw rides.
Indian banks too are offering incentives for e-rupee transactions, following a nudge from the RBI to boost volumes.
“Compensating employees using the CBDC is a good step,” Sharat Chandra, co-founder of India Blockchain Forum said. Other avenues such as toll tax collections can also be included to further encourage adoption, he added.
The RBI started its e-rupee pilot in December 2022 but transactions averaged only 25,000 a day by the end of October, even though its use case was significantly broadened by linking it to the popular United Payments Interface (UPI), a framework that facilitates peer-to-peer money transfer via mobile apps.
The RBI expects non-financial firms to eventually adopt the e-rupee like banks did, helping boost transactions further, one source added.
Meanwhile, a third executive familiar with the pilot said the e-rupee user base has steadily grown “to about 4 million users currently, up from 3 million in December”.
- Reuters, with additional editing by Vishakha Saxena