Read the primer on e-rupee here.

With the growing number of payment solutions available to the public, RBI is set to launch a pilot program to introduce E-rupee. The main intention behind this launch is to provide the masses with a risk-free virtual currency to use and invest, with minimal to no risks. E-rupee or Central Bank Digital Currency (“CBDC”) is the virtual currency issued by RBI. Its pilot program aims to create awareness and promote the planned benefits.

The concept note issued by RBI emphasizes the technology and design, issuance mechanism, and proposed use of CBDC. The idea is to combat terrorist financing and anti-money laundering activities, these being significant deterrents for India in regulating and promoting cryptocurrencies.


RBI is proposing two models for the issuance of CBDC – direct and indirect, with potential scope for a hybrid model.

In the direct model, the central bank manages all aspects of the CBDC system, viz., issuance, account-keeping, and transaction verification. In the indirect model, RBI issues CBDC to consumers indirectly through intermediaries (banks and any other service providers), and any claim by consumers thereafter is managed by the intermediary.


CBDC can be structured as “token-based,” where the possessor of the token is presumed to own it, or “account-based,” where records of balances and transactions would have to be maintained for all holders of CBDC.

With the two models of CBDCs – Wholesale and Retail, RBI is hoping for smooth integration into the financial system.

Wholesale CBDC will make settlement systems more efficient and secure. The Retail CBDC would offer a safer means of digital payment to the public compared to other digital payment solutions. A token-based CBDC is highlighted as the preferred mode for CBDC retail issue as it would be akin to cash. In contrast, an account-based token CBDC is being considered for CBDC wholesale issue.

While being introduced as a viable alternative to cash, CBDC, despite being a unique safety of central bank money, would not be an interest-bearing instrument.


The use of CBDC shall be possible for regular expenses and small payments instead of cash. Digitisation process is aimed to be enhanced with the state-of-art technology at play, eventually making a place for CBDC as a preferred mode of payment.

The Reserve Bank Digital Payment index (RBI-DPI) has demonstrated significant growth in the adoption and deepening of digital payments across the country since its inception.

PeriodRBI – DPI Index
March 2018 (Base)100
March 2019153.47
September 2019173.49
March 2020207.84
September 2020217.74
March 2021270.59
September 2021304.06
March 2022349.30
(Figure 4: RBI-DPI, Source: RBI)


To introduce CBDC as a cash-alternative payment solution, the degree of anonymity would be a key design decision, especially for the retail issue.

However, with anonymity, there are underlying risks of digital fraud, data breaches, lack of privacy and digital security incidents, etc. For Anti Money Laundering Compliances,  the CBDC framework should be able to address:

  1. the ultimate responsibility for Customer Due Diligence (CDD).
  2. embed a mechanism for identifying and monitoring the transactions, as per the threshold limit as applicable in the case of cash, to maintain the financial sector integrity.


BIS has published the results from a survey of Central Banks in June 2021, which notes that CBDCs could ease current frictions in cross-border payments –if central banks include an international dimension to CBDC.

CBDCs can boost innovation in cross-border payments, making these transactions instantaneous and helping overcome key challenges relating to time zone, exchange rate differences as well as legal and regulatory requirements across jurisdictions. Additionally, the interoperability of CBDCs presents means to mitigate cross-border and cross-currency risks and frictions while reinforcing the role of central bank money as an anchor for the payment system.


The increase in digital payment solutions indicates that cash can be easily alternated with RBI-backed digital currency. This option allows users to mitigate risks of volatility, fraud, and data privacy.

With RBI’s backing, CBDCs are proposed as a safe payment solution. CBDC will be a medium of payment, a legal tender, and a safe store value for all citizens, businesses, governments, and others, which can be converted to bank money or cash.

With the successful pilot launch, RBI is determined to introduce CBDC phase-wise, eventually leading the public towards easy access to digital currency. 

This is only for informational purposes. Nothing contained herein is, purports to be, or is intended as legal advice and you should seek legal advice before you act on any information or view expressed herein. Endeavoured to accurately reflect the subject matter of this alert, without any representation or warranty, express or implied, in any manner whatsoever in connection with the contents of this. This isn’t an attempt to solicit business in any manner.



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