The Reserve Bank of India plans to introduce additional additional functionalities of programmability in CBDC retail payments to facilitate transactions for specific/targeted purposes, and allow offline capability to enable these transactions in areas with poor or limited Internet connectivity.

Currently, the CBDC Retail (CBDC-R) pilot also allows Person to Person (P2P) and Person to Merchant (P2M) transactions using Digital Rupee wallets provided by pilot banks.

“Imagine a situation later on, when CBDC is fully implemented. If the government wants to give some cash support to certain individuals for a specific purpose, programmability will be useful so that the money can be used for specified purposes,” said Governor Shaktikanta Das.

Programmability will permit users like, for instance, government agencies, to ensure that payments are made for defined benefits. Similarly, corporates will be able to programme specified expenditures like business travel for their employees. Additional features such as validity period or geographical areas within which CBDC may be used can also be programmed.

For offline functionality, multiple offline solutions (proximity and non-proximity based) across hilly areas, rural and urban locations will be tested for this purpose, the central bank said, adding that these functionalities will be introduced through the pilots in a gradual manner.

“The major challenge for CBDC earlier was that it was looking to address payments use cases (P2P and P2M) that have already been largely solved by UPI or other digital payment modes. The new use cases will make CBDC more useful, as both offline payments and purpose specific payments need newer innovations to be successful. While e-rupee and offline UPI exist as products, there is a lot of headroom for growth, which can come via CBDC. Merging the two new use cases can allow more efficient distribution of government subsidies in remote areas,” said Ranadurjay Talukdar, Partner and Payments Sector Leader, EY India.

On asked if it will impact the fungibility of CBDC, Deputy Governor T Rabi Sankar cited the examples of a family budgeting their funds for various purposes such as buying groceries, or a school rewarding a student some prize money to buy books in a particular shop.

“When you do programmability, for a moment fungibility will be on hold, but we have to realize that it’s a facility that we are providing for the currency,” Sankar said adding that it a means of controlling expenditure which you do not get unless it’s a digital or token facility.

“The facility will typically be agreed by both the recipient as well as the person who puts that condition, so no programmability doesn’t militate against fungibility, it’s only a specific use binding,” he added. 

“Programmability and offline functionality in CBDC Retail (CBDC-R) promise speed, security, and convenience for users. Faster transactions, both online and offline, will be possible with programmable features and secure offline options. This visionary move empowers users with flexibility and ease, boosting India’s fintech ecosystem,” said Rahul Jain – CFO, NTT DATA Payment Services India.

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