RBI's CBDC pilot shows mixed results with the retail segment gaining momentum
While the retail segment gains momentum with daily transactions, the wholesale segment witnesses a decline in trade and settlement volumes.
RBI's CBDC Pilot Shows Mixed Results
Highlights
- RBI's CBDC pilot program shows strong growth in the retail segment but a decline in the wholesale sector
- Retail CBDC transactions reach 15,000 per day, benefiting from UPI interoperability
- Wholesale CBDC faces challenges due to its experimental nature and limited arbitrage opportunities
Central Bank Digital Currency (CBDC) initiatives are gaining traction around the world, and India is no exception. However, recent data suggests that the wholesale pilot of the CBDC launched by the Reserve Bank of India (RBI) has encountered some challenges.
Wholesale pilot of CBDC faces declining activity
The RBI's wholesale CBDC pilot, which began in November, aimed to settle trades of government securities (G-Secs) using the digital rupee. Initially, the pilot showed promising results, with daily settlement volumes ranging from Rs 500-600 crore and 45 to 60 trades a day in its first month.
Unfortunately, subsequent months witnessed a decline in activity, with daily settlement volumes dropping to just Rs 10-60 crore and trades dwindling to two to six per day.
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The concept of CBDC is still relatively new in India, and the participating banks didn't identify significant arbitrage opportunities. This, coupled with the pilot nature of the project, has resulted in limited engagement from banks.
Retail CBDC gains more momentum
In contrast to the wholesale segment, the retail pilot of the CBDC has been more successful. The RBI introduced the retail CBDC pilot in December, and it has been well-received.
During the Global SME Finance Forum 2023, held last month, RBI Deputy Governor T Rabi Sankar revealed that approximately 15,000 daily transactions were taking place in the retail CBDC pilot.
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This success can be attributed primarily to the seamless interoperability with the Unified Payments Interface (UPI) QR codes.
It is roughly around 15,000 transactions a day or so; we will have to take it to one million
This feature allows customers to send funds from a CBDC wallet or a bank account using a single QR code. The RBI's focus now is on scaling these retail CBDC transactions to reach one million daily transactions, which would provide a significant boost to digital currency adoption.
In short, while the wholesale pilot of the RBI's CBDC has faced challenges with declining trade and settlement volumes, the retail segment is showing promise, thanks to its integration with popular payment methods like UPI.
As the concept of CBDC matures in India, it's expected that both segments will witness increased interest and activity, contributing to the country's digital currency evolution.
