India full-scale wholesale CBDC launch may happen in early 2024: report

Barely one year after launching a wholesale central bank digital currency (CBDC) pilot, there is speculation that the Reserve Bank of India (RBI) will proceed with a full-scale rollout in early 2024.

According to a Financial Express report, the RBI’s wholesale CBDC may see real action as early as January 2024 with a potential use case for small and medium enterprises. Citing unnamed banking officials, the report notes that the year-long pilot has shown promise, although the central bank is still poised to adopt a measured approach given perceived risks.

“If we target MSMEs, their ticket size will be low while the volume of transactions will be high and in the first phase banks would not want it because they have to test the reliability of the system,” said one commercial bank executive.

After testing the waters with SMEs, Financial Express’ sources claim that the RBI will onboard larger corporate entities, with commercial banks reportedly working with technology partners to deploy wholesale CBDC systems given the three-month window to deploy systems, insiders with knowledge of the matter express optimism for an early 2024 rollout.

However, critics have poked holes in the plans to proceed with the launch for wholesale CBDCs, given the prominence of the existing Real Time Gross Settlement (RTGS) system. There are fears that some Indian lenders may be reluctant to adopt the wholesale CBDC offering given the “reliability of RTGS.”

“Wholesale CBDC is a new concept and companies have some concerns about dispute settlement,” said one unnamed source. “We need to create more awareness about dispute settlement among companies.”

Previous attempts to find practical use cases for a wholesale digital rupee received a lackluster response from participants. At launch, the RBI’s pilot explored the use of wholesale CBDCs to settle government bond transactions, but two months later, enthusiasm for the use case faltered.

In late October, the RBI made a valiant attempt to trigger renewed interest in the offering through call money, a short-term lending alternative for commercial banks, with the central bank keen on starting experiments before the end of the year.

India’s retail CBDC takes all the spotlight

While uncertainties continue to trail the RBI’s wholesale CBDC, its retail iteration has been making significant progress since the pilot began in late 2022. After racking over 50,000 users in the first three months, the RBI is eyeing 1 million daily transactions before the end of the year, with daily transaction volumes hovering around the 25,000 mark.

To meet the RBI’s objectives, three Indian commercial banks have introduced several initiatives to increase adoption rates, including redeemable reward points for every retail CBDC transaction. Previously, the RBI has pointed to a CBDC integration with the Unified Payments Interface (UPI), offline payments, and the possibilities of cross-border transactions as veritable strategies to rope in users.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: Exploring use cases for blockchain in India