RBI’s CBDC may struggle for relevance

The RBI this month asked four public-sector banks to trial its central bank digital currency (CBDC) before year-end, keeping to the timeline that it set out when plans were first announced in the FY22/23 Union Budget. As our CBDC handbook explains, any CBDC brings risks (e.g. around financial stability) and opportunities (e.g. more efficient payments, new policy options). But for many, a key challenge could turn out to be indifference among consumers. While the benefits for a central bank are clear, it is not obvious what advantages they offer to consumers in countries that already have efficient mobile payments systems. India is a good example. Its mobile payment system already facilitates low-cost, real-time payment and supports broad inter-operability between different providers’ systems. A new e-rupee mobile wallet would offer little advantage to existing mobile users – and their numbers have already soared over the past two years.