RBI eyes eRupee CBDC to boost cross-border transactions and elevate India's global financial standing

The Reserve Bank of India (RBI) has highlighted the potential of its central bank digital currency (CBDC), the eRupee, to transform cross-border transactions and enhance India's position in the global financial landscape. In its latest report on currency and finance, the RBI outlines its vision for the eRupee, which is currently in its advanced trial phase.

The report highlights the role of the eRupee in strengthening India's "soft power" projection: "Crossborder digital trade policies and digitalisation, along with measures aimed at internationalising the Indian Rupee (INR) and the CBDC project, would play a crucial role in harnessing new opportunities, supporting seamless international transactions, reducing foreign exchange risks and managing global liquidity,” the report noted.

The RBI is actively exploring avenues to facilitate foreign direct investments (FDIs) in India's burgeoning fintech sector, with the eRupee playing a key role in this strategy. The central bank believes that the integration of the CBDC into the financial system will enhance data security, expand the availability of e-payment services, and foster the development of digital skills within the country.

As of May 2024, India was one of 36 nations globally with their respective CBDCs in the pilot phase. CBDCs, like the eRupee, are digital representations of fiat currencies issued and regulated by central banks. Built on blockchain technology, CBDCs offer transparency, security, and efficiency, potentially reducing reliance on physical cash and revolutionising financial transactions.

"As of June 2024, 50 lakh users and 4.2 lakh merchants were participating in the CBDC retail pilot," the report highlighted. The eRupee is currently being tested in both retail and wholesale sectors for person-to-person (P2P) and person-to-merchant (P2M) transactions.

What is eRupee? Digital Cash, Backed by the Government

Think of eRupee like a digital version of the Indian Rupee (INR), just like how you have cash in your wallet and money in your bank account. Except, instead of being printed on paper or stored on bank servers, it lives on a secure digital ledger called a blockchain.

Here's the breakdown:

Issued by the RBI: eRupee is a Central Bank Digital Currency (CBDC), meaning it's issued and regulated by the Reserve Bank of India, just like regular Rupees.

Digital Cash: It's basically digital cash you can use for transactions, without needing a bank account.

Blockchain-Based: It uses blockchain technology for secure, transparent, and traceable transactions.

Still Under Trial: It's currently being tested in India for various use cases, like everyday payments and government welfare programs.

In simple terms, eRupee is like having digital cash backed by the Indian government, offering a new way to make payments in the digital age.