Nearly four years after the Reserve Bank of India (RBI) launched the pilot for the digital rupee, the central bank's flagship payments initiative is yet to become a preferred mode of payment for ordinary users, with the runaway success of the Unified Payments Interface (UPI) leaving little room for another retail payments platform.
However, bankers say the RBI may have found the digital rupee's winning use case in programmable Central Bank Digital Currency (CBDC), which allows money to be spent only for a pre-defined purpose. Public sector banks are increasingly deploying programmable CBDC for government welfare schemes, Direct Benefit Transfers (DBTs), targeted lending and employee benefits, giving fresh momentum to what has otherwise been a slow-moving project.
Executives of Punjab National Bank (PNB), Canara Bank and Indian Bank told TNIE that while retail CBDC transactions remain modest, programmable CBDC is beginning to demonstrate tangible value by enabling governments and banks to control the end use of funds.
Punjab National Bank Managing Director and CEO Ashok Chandra said the bank is among the leading participants in the RBI's programmable CBDC initiative and has already deployed it for DBT and subsidy schemes in at least one state, with similar projects expected to be rolled out elsewhere.
"The way programmable CBDC is progressing, it will definitely expand. We need to wait for some time," Chandra said.
PNB currently has around 172,000 CBDC users and has processed nearly 1.53 million digital rupee transactions, making it one of the more active participants in the RBI's pilot.
Canara Bank Managing Director and CEO Brajesh Kumar Singh said the digital rupee is finding acceptance primarily through programmable applications rather than retail payments. The bank has implemented programmable CBDC in Puducherry for the Pradhan Mantri Garib Jan Kalyan Yojana, allowing welfare benefits to be spent only for designated purposes. It has also started disbursing certain employee benefits through programmable CBDC to familiarise users with the platform.
"The biggest advantage of programmable CBDC is that you can control where the money is spent," Singh said. Canara Bank's CBDC business has increased from 11.99 lakh to 19.26 lakh, reflecting growing adoption.
Yet Singh admitted that competing with UPI in retail payments will be difficult. "UPI is such a hit that it has overshadowed everything. CBDC and UPI are differently placed. Programmable CBDC offers capabilities that UPI cannot."
Indian Bank Managing Director and CEO Binod Kumar says programmable CBDC can ensure that loans and subsidies are used strictly for their intended purpose. A machinery loan, for instance, could be programmed so that the amount can be spent only on purchasing machinery, while payments made under paddy procurement schemes could be restricted exclusively to procurement-related transactions.
Indian Bank currently records 40,000-50,000 CBDC transactions every month and has also begun extending certain employee benefits through the digital rupee.
