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India's e-Rupee: New Money With Wrinkles Of The Old

The retail CBDC pilot has been live since December but Mumbai's merchants are yet to see significant digital rupee activity.

<div class="paragraphs"><p>(Image credit: Rupixen/Unsplash)</p></div>
(Image credit: Rupixen/Unsplash)

India’s central bank digital currency, e-Rupee, has been out in the wild for about four months but is yet to excite the imagination of consumers and merchants. 

Currently in the pilot stage, the retail e-Rupee was rolled out by Reserve Bank of India at the end of November. The digital currency has since facilitated 7.75 lakh transactions, according to a public statement made by RBI Deputy Governor T Rabi Sankar in February.

But among retail outlets across Mumbai that BQ Prime visited, all but one merchant told BQ Prime that no customer had walked in to transact with the digital rupee. 

In a half dug-up in-lane in Bandra East, a clothing store, Meena Dresses, and jewellery store, Amrut Jewellers, have both set up the QR-codes to enable e-Rupee transactions but their respective proprietors have little understanding of how the whole thing works. Janata Dry Fruit and Gift Store in Matunga also had the QR-code but it was tucked away in an envelope and never used before BQ Prime attempted a CBDC transaction there. 

“Many people asked what this new thing is. We told them it’s e-money. But when people asked how they can use it, we said we don’t know ourselves,” Ketan Shetia, owner of Meena Dresses, said when BQ Prime visited the store to try out the CBDC. While the digital rupee’s physical QR-code has been installed at Shetia’s store, his bank is yet to set up his wallet or instruct him on how to confirm transactions, he said. 

Things are a little more streamlined at larger retail chains though. Located in Mumbai’s swanky Jio World Drive mall, Freshpik is among the Reliance Retail Ltd.'s stores that have started to accept the CBDC. A Freshpik store executive told BQ Prime that a few CBDC transactions have occurred at the store and most of them were done by banking executives involved in the pilot.  

When BQ Prime attempted a transaction at Freshpik, it failed to go through multiple times. But such teething issues are only expected given that the pilot phase is still ongoing. The transactions attempted at Meena Dresses and Janata Store went through without any hitch. 

Although the CBDC is similar to massively popular UPI in being QR-code driven, the overlap between the two ends there. UPI is more like a network of pipes for money to flow through but the CBDC is money itself. UPI transactions involve communication with banks but CBDC tokens—in the form of digital bank notes—flow from one wallet to the other. 

But more importantly, UPI doesn’t carry constraints that make cash inconvenient, such as the problems of loose change. For instance, buying an item for Rs 91 would require the consumer to load their digital currency wallets in exact denominations such as 1 note of Rs 50, 2 notes of Rs 20, and 1 coin of Re 1. These steps add friction to transactions, especially when consumers are used to the ease of UPI payments which encounter no such issues.  

Given that the CBDC will enter a crowded space for payment options in India, it is bound to face an uphill climb to popularity. If the ultimate objective for the CBDC is to replace cash as a payment tool, the new form of money might just need to start with loosening some of the straps that constraints its predecessor. 

Till that happens, the digital rupee’s design may keep birthing hiccups that hold back consumers and merchants from aiding its adoption. 

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