India's RBI Launches Offline Digital Rupee

In a bold move to expand the reach of its Central Bank Digital Currency (CBDC), the digital rupee, the Reserve Bank of India (RBI) is set to roll out offline functionalities. RBI Governor Shaktikanta Das announced the initiative aimed at fostering greater adoption in India's connectivity-challenged regions. This announcement came during a Monetary Policy Committee review on February 8, spotlighting the RBI's commitment to making digital currency accessible even in the country's most remote corners.

The digital rupee, introduced in a pilot phase in December 2022, has already marked a significant milestone by achieving one million daily transactions by December 2023. The introduction of offline capabilities seeks to bridge the digital divide, especially in rural and hilly areas, by enabling transactions without the need for internet connectivity. RBI plans to assess various offline solutions, including both proximity and non-proximity-based methods, to ensure efficient and inclusive financial services across diverse geographical landscapes.

Currently, the CBDC system supports person-to-person (P2P) and person-to-merchant (P2M) transactions through digital wallets provided by pilot banks. This development is part of the RBI's broader vision to enhance cross-border transactions and integrate with international financial systems, a vision initially shared by RBI’s executive director, Ajay Kumar Choudhary, in March 2023.

Despite the digital rupee's novel offline feature, India already hosts popular payment services like the Unified Payments Interface (UPI) that offer offline transactions. Siddharth Sogani, CEO of the blockchain analytics firm Crebaco, emphasized that while CBDCs serve as an alternative payment method, their primary goal aligns with the government’s ambition to monitor monetary transactions closely and phase out cash.

Both developing and advanced economies view CBDC projects as tools for achieving financial stability and improving cross-border payment efficiency. However, for developing nations, including India, the drive towards CBDCs is also about fostering financial inclusion, ensuring that even the most remote communities have access to banking and financial services.