The Reserve Bank of India (RBI) has proposed to involve non-bank payment system operators (PSO) to offer central bank digital currency (CBDC) to retail customers. On the last day of the three-day-long monetary policy meeting (MPC) on April 5, 2024, RBI Governor Shaktikanta Das announced that CBDC distribution through non-bank PSOs is expected to benefit more people and enhance banking penetration.
“CBDC pilots in the Retail and Wholesale segments are underway with more use cases and more participating banks. Continuing with this approach, it is proposed to make CBDC-Retail accessible to a broader segment of users in a sustained manner, by enabling non-bank payment system operators to offer CBDC wallets. This is expected to enhance access and expand choices available to users apart from testing the resiliency of the CBDC platform to handle multi-channel transactions. Necessary changes will be made to the system to facilitate this,” Das said.
Non-bank PSOs are institutions authorised to undertake payment transactions. They provide financial payment and settlement transaction activities mostly through outsourcing. These include RBI-regulated payment service providers, and non-banking financial companies (NBFCs), among others.
CBDC is the digital version of a nation’s fiat currency. The Indian CBDC is known as the Digital Rupee. It is regulated by RBI, and thus, carries sovereign status as a legal tender for transactions.
RBI had launched CBDC on December 1, 2022 as a pilot project with 13 banks, namely, the State Bank of India, ICICI Bank, Yes Bank, IDFC First Bank, Bank of Baroda, Union Bank of India, HDFC Bank, Kotak Mahindra Bank, Punjab National Bank, Canara Bank, Federal Bank, Axis Bank, and IndusInd Bank.
In the February 2024 MPC meeting, Das had announced to explore and enhance different use cases of CBDC to widen its presence so that just like cash, it can also be used for peer-to-peer, peer-to-merchant, and other transactions. He also talked about developing its offline functionality to enable its usage in far-flung and remote hilly and rural areas.
However, until now, only banks were offering CBDC service on a pilot basis. Now with the proposed inclusion of the non-bank PSOs for CBDC distribution, it is likely to grow manifold in the future.
RBI had earlier said that CBDC is a pilot project with a huge size. The project is developing, and its number of users is also increasing. There are around 4.3 million CBDC-retail (CBDC-R) users and around four million merchant users.
RBI has kept CBDC as a pilot project so far while testing different scenarios, existing challenges, and other potential challenges. There is, however, no timeline yet for launching CBDC for the people in a full-fledged manner.
