Offline eRupee to boost digital payments in rural India: RBI

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The Reserve Bank of India (RBI) has announced that it will introduce an offline functionality for its Central Bank Digital Currency (CBDC) pilot project, the eRupee. This will enable users to execute transactions in areas with poor or limited internet connectivity, such as hilly regions and remote villages. The RBI also said that it will enable additional use cases for the eRupee using programmability and offline features.

What is the eRupee and how does it work?

The eRupee is a digital version of the Indian rupee, issued and backed by the RBI. It is designed to be a legal tender and a secure and efficient mode of payment. The eRupee can be accessed through digital wallets provided by pilot banks, which are linked to the users’ Aadhaar numbers. Users can transfer eRupees to other users or merchants using their mobile phones, without the need for a bank account or a card.

The eRupee was launched as a pilot project in December 2022, with the aim of testing the feasibility and acceptability of a CBDC in India. The pilot project has achieved the target of having 10 lakh transactions a day in December 2023, according to RBI Governor Shaktikanta Das.

Why is offline functionality important for the eRupee?

One of the challenges of digital payments in India is the lack of reliable and affordable internet access in many parts of the country. According to a report by the Internet and Mobile Association of India (IAMAI), only 45% of the rural population had internet access in 2023. This limits the adoption and usage of digital payment platforms, such as the Unified Payments Interface (UPI) and the Aadhaar Enabled Payment System (AePS), which require internet connectivity.

Shaktikanta Das

To overcome this barrier, the RBI has proposed to introduce an offline functionality in the eRupee, which will allow users to execute transactions without internet connectivity. The RBI will test multiple offline solutions, which include both proximity and non-proximity based ones, across different locations.

The offline functionality will enhance the inclusivity and accessibility of the eRupee, especially for the rural and under-served segments of the population. It will also reduce the dependence on cash and promote financial inclusion.

What are the additional use cases for the eRupee using programmability?

The RBI has also announced that it will enable additional use cases for the eRupee using programmability and offline functionality. Programmability is a feature that allows users to customize and automate certain aspects of the eRupee transactions, such as the purpose, amount, time, and location of the payment.

The programmability feature will permit users such as government agencies to ensure that payments are made for defined benefits, such as subsidies, pensions, and scholarships. Corporates will also be able to programme specified expenditures, such as business travel, for their employees. Additional features, such as validity period or geographical areas within which the eRupee may be used, can also be programmed.

The programmability feature will enhance the efficiency and transparency of the eRupee transactions, as well as prevent fraud and misuse. It will also enable the creation of innovative and customized payment solutions for different sectors and segments of the economy.

How will the RBI enhance the security of the eRupee and other digital payment systems?

The RBI has also expressed its intent to enhance the security of the eRupee and other digital payment systems, such as the AePS, which was used by 37 crore people in 2023. The RBI will streamline the onboarding process, including mandatory due diligence, for AePS touch point operators, to be followed by banks. The RBI will also adopt a principle-based “Framework for authentication of digital payment transactions”, to facilitate the use of new mechanisms for digital security, such as biometrics, QR codes, and tokens.

The RBI’s measures will strengthen the trust and confidence of the users and the merchants in the digital payment systems, as well as protect them from cyberattacks and data breaches.

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