How CBDCs Could Transform Digital Payments

The financial landscape of India is undergoing rapid change with the rise of digital solutions. Among the most significant innovations is the Central Bank Digital Currency (CBDC). As technology reshapes the way money moves, CBDCs are positioned to bring a new dimension to India’s economy, enhancing efficiency, transparency, and financial inclusion.

In this article, we explore how a CBDC in India, supported by the Reserve Bank of India (RBI), the e-RUPI digital currency, and related initiatives, could transform payments and digital finance across the country.

CBDC Full Form and Global Context

The CBDC, unlike cryptocurrencies, which are decentralised, is issued and regulated by a nation’s central bank. It represents legal tender in digital form and functions alongside existing physical cash and electronic money.

Globally, CBDCs aim to reduce cash reliance and streamline cross-border payments. India, with UPI processing 20 billion transactions (₹25 trillion) in August 2025, is a digital finance leader, aligning its CBDC with Payments Vision 2025 for a cash-lite future.

The RBI’s e-Rupee programme seeks to enhance payment efficiency, expand financial access, and support a digital economy. Launched in November 2022 (wholesale, e₹-W) and December 2022 (retail, e₹-R), pilots test real-world applications like interbank settlements and consumer purchases. 

By March 2025, the retail pilot spans 17 banks (e.g., HDFC, ICICI) and over 6 million users, with ₹1,016 crore in circulation, a 334% rise from ₹234 crore in 2024. Despite this, usage remains low at 0.006% of banknotes, reflecting RBI’s cautious, “no rush” approach to ensure scalability and trust.

e-RUPI: Paving the Way

Introduced in 2021 by NPCI and RBI, e-RUPI is a prepaid, QR/SMS-based voucher for targeted payments, redeemable without bank accounts or apps. It supports:

1. Direct Benefit Transfers: Delivering subsidies (e.g., Odisha’s Subhadra Yojana for 88,000 women) with minimal leakage.
2. Healthcare Payments: Enabling contactless medical transactions.
3. Inclusion: Bridging gaps for unbanked users via UPI merchants.

Active in 2025, e-RUPI’s programmability complements the e-Rupee, proving concepts like restricted-use payments for broader CBDC adoption.

Key Drivers of CBDC Adoption

1. Seamless Transactions: e-Rupee enables near-instant payments, integrated with UPI’s 645 million daily transactions, cutting intermediary delays.
2. Financial Inclusion: around 190 million unbanked adults (22% of population) gain access via mobile wallets, building on PMJDY’s 80% banking coverage.
3. Transparency: DLT ensures auditable trails, reducing fraud in ₹50 billion+ DBT schemes and aiding AML compliance.
4. Cost Savings: Eliminates cash-handling costs (0.5% of GDP) and reduces fees, with pilots showing 20% faster settlements.

These drivers, vital for “e-Rupee benefits 2025” searches, highlight transformative potential.

India’s Digital Transformation

India’s digital journey has been remarkable, with UPI accounting for nearly 85% of digital transactions. Complementing this, the e-RUPI digital currency has created a foundation for seamless, targeted digital payments. Together, they set the stage for the adoption of a CBDC in India.

Despite rapid progress, cash still represents almost 50% of transactions. The proposed CBDC, or digital rupee, aims to bridge this gap by offering secure and user-friendly wallets through India’s thriving fintech ecosystem. Economic studies suggest that streamlined CBDC payments could unlock potential GDP gains of 1–2% by improving efficiency and reducing transaction costs.

The CBDC RBI pilot project has also prioritised inclusivity, with offline trials rolled out across 17 cities. These pilots test the use of CBDC in areas with limited connectivity, ensuring that India’s transformation into a central bank digital currency economy leaves no community behind.

CBDC Pilot Project Insights

The CBDC pilot project launched by the Reserve Bank of India (RBI) is designed to test both wholesale and retail applications of the central bank digital currency (CBDC). In wholesale markets, pilots are being used for bond settlements through the NDS-OM platform, creating faster and more efficient interbank transfers. On the retail side, pilots are exploring everyday use cases such as shopping, transport, and peer-to-peer CBDC payments.

Programmable features are a key innovation. The CBDC can be tailored for specific purposes, such as tracking carbon credits or disbursing farmer loans. Cross-border trials, including collaborations with the UAE and Singapore, are also examining how the central bank digital currency India could integrate with global systems, reducing friction in international transactions.

However, adoption levels remain relatively low. This highlights the need for greater incentives, robust user education, and awareness campaigns. As interest in “CBDC pilot India 2025” grows, the RBI is focusing on creating an ecosystem where individuals and businesses understand and trust the e-rupee as a legitimate CBDC currency.

Broader Impacts of CBDCs

Economic Growth

The e-Rupee digital currency is expected to foster financial innovation, reduce trade costs, and improve efficiency across India’s economy, which continues to grow at around 7% annually. By simplifying settlement processes and encouraging digital-first businesses, CBDCs can unlock new avenues for productivity.

Cross-Border Payments

India is one of the world’s largest recipients of remittances, valued at over £100 billion annually. Multilateral CBDC pilot projects such as mBridge have the potential to halve SWIFT-related fees and settlement delays. A fully functional central bank digital currency RBI network could thus transform India’s global payment systems.

Digital Governance

CBDCs can significantly improve governance through traceable direct benefit transfers (DBT). By ensuring transparency and accountability in welfare schemes, a CBDC payment system enhances efficiency while building greater trust between citizens and the state.

CBDC, e-RUPI, and the Future of Payments

India’s payment ecosystem is evolving in layers: UPI brings scale, the e-RUPI digital currency ensures targeted benefits, and the CBDC digital rupee introduces legal tender in digital form. Together, these innovations are shaping a cash-lite future.

By 2030, the integration of UPI, e-RUPI, and the CBDC India framework could support 1 billion daily transactions, creating one of the most advanced digital payment infrastructures globally. Beyond traditional payments, CBDCs are expected to power new financial models such as decentralised finance (DeFi), programmable smart contracts, and green finance initiatives.

As India advances towards full-scale adoption, the central bank digital currency RBI programme will serve not just as a digital alternative to cash, but also as a catalyst for sustainable economic growth and technological innovation.

Bold Step in Inclusion

India’s e-Rupee, alongside e-RUPI, marks a bold step towards a secure and inclusive financial system. With ₹1,016 crore in circulation and expanding pilots, the CBDC promises efficiency and equity. By balancing innovation with caution, India could set global benchmarks and empower 1.4 billion citizens, shaping the future of digital finance for “CBDC India 2025” seekers.

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