The Reserve Bank of India (RBI) has announced that it will introduce offline functionality for e-rupee transactions, which will enable users to make payments in areas with poor or limited internet connectivity. The e-rupee is the digital version of the Indian currency, which is officially known as Central Bank Digital Currency (CBDC). The RBI launched a pilot project of the retail CBDC in December 2022, and achieved the target of having 10 lakh transactions a day in December 2023.
What is e-rupee and how does it work?
The e-rupee is the same as a sovereign currency, but in digital form. It is exchangeable one-to-one at par with the existing currency and shall be accepted as a medium of payment, legal tender and a safe store of value by all citizens, enterprises and government agencies. The e-rupee does not earn any interest, like cash, and can be converted to other forms of currency, such as bank deposits.
The e-rupee users can execute transactions both Person to Person (P2P) and Person to Merchant (P2M) using digital rupee wallets provided by pilot banks. The payments can be made to merchants via QR codes. The e-rupee offers trust, safety and settlement finality, as it is a sovereign currency issued by the RBI. The e-rupee also reduces the cost of issuance of money and transactions.
What are the benefits of offline e-rupee transactions?
The offline functionality of e-rupee transactions will allow users to make payments in areas with poor or limited internet connectivity, such as hilly areas, rural and urban locations. For this purpose, multiple offline solutions, which include both proximity and non-proximity based ones, will be tested by the RBI.
The offline capability will also enable additional use cases using programmability and offline functionality. The programmability feature will allow users like government agencies to ensure that payments are made for defined benefits, such as subsidies or welfare schemes. Enterprises will also be able to use this programme for specific expenditures, such as business travel for their employees.
The offline e-rupee transactions will also enhance financial inclusion, as more people will be able to access digital payments without depending on internet connectivity. The offline e-rupee transactions will also reduce the dependency on cash, which has high handling costs and risks of theft or counterfeit.
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