The Reserve Bank of India (RBI) is targetting 10 lakh CBDC (Central Bank Digital Currency) transactions per day by the end of the current year, Deputy Governor T Rabi Sankar said on Tuesday.

This volume of transactions will provide the central bank with sufficient data points to understand and track the usage of the digital currency, while at the same time not being high enough to be attainable, Sankar said at an event organised by the Indian Banks’ Association (IBA).

Increasing usability

RBI is hoping to achieve this milestone by making CBDC interoperable with the UPI system, thus increasing its usability, accessibility, and use cases.

“We have also decided that we will take advantage of the UPI network to increase transactions in CBDC. We said that there has to be interoperability of the QR codes,” Sankar said, adding that currently the process involves onboarding merchants and creating separate QR codes.

“We found that if nothing else, it takes a lot of time, and especially large merchants had to do a lot of internal processes. So, we decided that the users of CBDC need not be disabled from the transaction because the merchant doesn’t have it. At the end of the day, it is money, and it is convertible into bank deposits. So, we decided that we would do the interoperability,” he said.

Currently, the CBDC-R system processes about 5,000–10,000 transactions per day across a user base of 13 lakh customers and 3 lakh merchants.

The 13 banks involved in the retail CBDC pilot have already rolled out partial UPI interoperability and are expected to implement it completely by the end of July, Sankar said, adding, however, that extending it to the remaining top 20–25 banks will take some more time.

The facility will involve the use of UPI QR codes to make CBDC transactions in order to simplify the process for users. Further, even if the merchant does not have a CBDC wallet, CBDC payments via UPI will allow for the e-rupee to be deposited in the merchant’s or receiver’s bank account.

Even as CBDC is being introduced as digital money compared with UPI, which is just a payments system, the central bank will have to formulate a separate strategy to convince users of the value of using CBDC over UPI, onboard them, get traction and liquidity in the system, and then expand its use cases, Sankar said.

Talking about the comparisons with cryptocurrency, he said that CBDC has the features of both a currency and bank deposits, and thus there is no question regarding the character of the asset, unlike in the case of crypto, which does not have “storable value”.