How CBDCs Could Transform Digital Payments

India’s financial landscape is changing fast. Among the biggest drivers of this change is the rise of Central Bank Digital Currency (CBDC). As technology reshapes how money moves, CBDCs are poised to make digital payments in India faster, more transparent, and more inclusive.

In this article, we will understand how a CBDC in India, supported by the RBI, the e-RUPI digital currency, and other initiatives, could transform payments and the broader digital economy.

CBDC Full Form and Global Context

A CBDC, unlike cryptocurrencies, is issued and regulated by a country’s central bank. It represents legal tender in digital form and works alongside cash and electronic money.

Globally, CBDCs aim to reduce reliance on cash and streamline payments, especially across borders. India is already a leader in digital finance, with UPI processing 20 billion transactions (Rs 25 trillion) in August 2025. The CBDC aligns with India’s Payments Vision 2025, pushing the country closer to a cash-lite economy.

The RBI’s e-Rupee programme is designed to improve payment efficiency, expand access to finance, and support India’s digital economy. Since its launch in November 2022 (wholesale, e₹-W) and December 2022 (retail, e₹-R), pilots have tested applications like interbank settlements and everyday consumer payments.

By March 2025, the retail pilot included 17 banks, over 6 million users, and Rs 1,016 crore in circulation, a huge jump from Rs 234 crore in 2024. Despite these numbers, adoption remains modest at just 0.006% of banknotes, reflecting the RBI’s cautious approach to scaling the system safely.

e-RUPI: Paving the Way

Launched in 2021 by NPCI and RBI, e-RUPI is a prepaid voucher delivered via QR code or SMS, redeemable without a bank account or mobile app. It’s already making a difference:

Direct Benefit Transfers: Subsidies, like Odisha’s Subhadra Yojana for 88,000 women, reach beneficiaries with minimal leakage.

Healthcare Payments: Enables contactless, secure payments in hospitals and clinics.

Financial Inclusion: Connects unbanked users via UPI merchants.

e-RUPI’s programmability complements the e-Rupee, showing how restricted-use digital payments can work effectively on a larger scale.

Key Drivers of CBDC Adoption

Several factors make CBDCs a game-changer for digital payments in India:

Seamless Transactions: The e-Rupee enables near-instant payments, integrated with UPI’s 645 million daily transactions, reducing delays.

Financial Inclusion: Around 190 million unbanked adults could gain access through mobile wallets, building on PMJDY’s 80% banking coverage.

Transparency: Blockchain-based ledgers make transactions auditable, reducing fraud in Rs 50 billion+ DBT schemes and supporting AML compliance.

Cost Savings: By reducing cash handling costs (around 0.5% of GDP), pilots show 20% faster settlements.

These benefits show why the e-Rupee could transform payments and digital finance in India.

India’s Digital Transformation

India’s digital journey has been remarkable. UPI now accounts for nearly 85% of digital transactions, while e-RUPI sets the stage for targeted, traceable payments. Together, they lay the foundation for full CBDC adoption.

Cash, however, still accounts for roughly 50% of transactions. The CBDC aims to bridge this gap by offering secure, user-friendly wallets, supported by India’s fintech ecosystem. Studies suggest that streamlining CBDC payments could boost GDP by 1–2% by reducing costs and improving efficiency.

Offline pilots across 17 cities ensure that even communities with limited connectivity can access CBDC payments, keeping financial inclusion at the forefront.

CBDC Pilot Project Insights

The RBI’s CBDC pilot project tests both wholesale and retail use:

Wholesale: Bonds and interbank settlements via the NDS-OM platform are faster and more efficient.

Retail: Everyday applications like shopping, transport, and peer-to-peer payments are being trialled.

Programmable features are key. CBDCs can be customised for specific purposes like tracking carbon credits, disbursing farmer loans, or supporting conditional subsidies. Cross-border trials with the UAE and Singapore explore global integration, cutting friction in international payments.

Adoption remains low, highlighting the need for education, incentives, and awareness campaigns to build trust in the CBDC as a real alternative.

Broader Impacts of CBDCs

Economic Growth: By simplifying settlements and reducing trade costs, CBDCs can foster digital-first business models and boost productivity in India’s 7% annual growth economy.

Cross-Border Payments: India receives over $100 billion in remittances yearly. CBDC pilots like mBridge could cut SWIFT fees and settlement delays by half, transforming global remittances.

Digital Governance: Traceable CBDC payments can make direct benefit transfers more transparent, reducing leakages and building trust in government programs.

CBDC, e-RUPI, and the Future of Payments

India’s payment system now has multiple layers:

UPI for scale

e-RUPI for targeted benefits

CBDC digital rupee for legal tender digital payments

By 2030, integration of these layers could support 1 billion daily transactions, creating one of the most advanced digital payment systems in the world. Beyond daily transactions, CBDCs may power DeFi applications, programmable smart contracts, and green finance initiatives.

Bold Step in Inclusion

The e-Rupee and e-RUPI represent India’s commitment to a secure and inclusive financial system. With Rs 1,016 crore in circulation and growing pilots, CBDCs offer both efficiency and equity. By combining innovation with caution, India could set global benchmarks, empowering its 1.4 billion citizens and shaping the future of digital payments in India 2025.

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