With the CBDC (Central Bank Digital Currency) now interoperable with UPI (Unified Payments Interface), the Reserve Bank of India’s focus now is on increasing the volume of e-rupee transactions, Deputy Governor T Rabi Sankar said.

“It is roughly around 15,000 transactions a day or so; we will have to take it to one million (10 lakh). Initially, our efforts over the last 1-1.5 months have been to make it interoperable with the UPI QR codes. With that process done, we’ll focus on the transactions,” Sankar said on the sidelines of the Global SME Finance Forum 2023.

CBDC interoperability

Over the last month, several banks, both PSU and private, have rolled out CBDC interoperability with UPI, enabling users to make e-rupee transactions using the same merchant or peer QR code as UPI.

Drawing parallels to the success of digital public infrastructure in transforming the payments landscape, Sankar said that the same can be replicated in MSME lending to support economic activity and complement other policy efforts.

He highlighted that the expert committee on MSMEs, headed by UK Sinha, has identified challenges such as inadequate digitisation and access to credit, information asymmetry, and delays in payments, among others.

“These are all problems that can be solved efficiently through digitisation, and access to digital infrastructure,” he said, adding that “financing can be addressed through alternate credit scoring mechanisms, cash flow-based lending, and digitised collateral registries”.

“Expanding the universe of the digital ecosystem creates opportunities to meet this credit gap and the challenges that MSMEs face,” Sankar added, highlighting the important role of TreDS (trade receivables discounting system) platforms in facilitating better capital flows and bill discounting to address the issue of delayed payments.

Frictionless credit

An initiative by the Central Bank on this front has been the public tech platform for frictionless credit, the pilot was launched last month.

The platform will enable frictionless credit by facilitating a seamless flow of data that requires comparing the prices available with different entities like central and state governments, account aggregators, banks, credit information companies, and digital identity authorities, and is gradually picking up speed.

As additional data and information gets added to the open architecture platform, more financial sector participants will be able to connect to the platform, which has the potential to accelerate credit flow to small entrepreneurs in the country, Sankar said.

“The five States (that joined) were initially for the KCC loans, and Gujarat was there for dairy loans. The pilot we have started was to enable it for all kinds of transactions,” he said on the sidelines, adding that a lot will also depend on which data and information systems are linked to the platform over a period of time.

The States onboarded for the pilot for KCC loans are Madhya Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh, and Maharashtra.