The Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) are focusing on offline and feature phone-based payments to drive the adoption of the central bank-backed digital currency (CBDC). This strategic shift aims at propelling the use of digital payments, particularly in areas with weak or unreliable internet connectivity, which often hampers the adoption of online digital payment methods like UPI, IMPS, and RTGS.
In January 2022, the RBI released a framework for facilitating small value digital payments in offline mode, following feedback from pilot experiments conducted across various parts of India from September 2020 to June 2021. This framework allows for transactions that do not require internet or telecom connectivity, using channels like cards, wallets, or mobile devices. The framework initially set a limit of ₹200 per transaction and a total limit of ₹2000 for all transactions until the balance is replenished. These offline transactions are designed to be carried out face-to-face (proximity mode) and do not require an Additional Factor of Authentication (AFA), although alerts (SMS/email) will be received with a time lag.
More recently, as of August 24, 2023, the RBI has increased the transaction limit for small-value digital payments in offline mode from ₹200 to ₹500. This enhancement is part of the efforts to encourage wider adoption of this mode of payment and to bring in more use cases. Offline payments can be made using the National Common Mobility Card or UPI Lite. The RBI has also proposed the use of near-field communication (NFC) technology to facilitate offline transactions, which is particularly beneficial in areas with poor or no internet connectivity.
RBI and NPCI’s Offline Payment Initiatives
The RBI and NPCI have taken several steps to promote offline payment solutions:
- CBDC Sandbox: The RBI has established a sandbox environment to encourage innovation and experimentation with offline CBDC (Central Bank Digital Currency) use cases.
- IDEMIA, Airtel, and Nokia Collaboration: IDEMIA, Airtel, and Nokia have partnered to develop offline CBDC payment solutions for feature phones.
- HDFC Bank’s Interoperability Initiative: HDFC Bank has implemented interoperability between UPI (Unified Payments Interface) and CBDC QR code payments, enabling offline transactions.