RBI eyes bigger role for e-rupee in welfare payouts, cross-border transactions

The Reserve Bank of India (RBI) is looking to expand the use of the digital rupee in welfare payments and cross-border transactions, signalling a broader push to deepen adoption of the country’s central bank digital currency (CBDC).

In its 2025-26 annual report released on Friday, the RBI said it conducted multiple welfare-linked CBDC pilot programmes during the financial year in states and Union Territories including Gujarat, Puducherry and Chandigarh, where beneficiaries received food subsidies through the e-rupee.

The central bank said several government agencies had also begun testing direct benefit transfer (DBT) schemes using the programmable features of the CBDC.

“At the institutional level, multiple government agencies commenced pilots in various direct benefit transfer (DBT) schemes leveraging programmability feature of CBDC to ensure productive utilisation of public funds,” the RBI said.

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Programmability allows the digital currency to be restricted for specific purposes, enabling tighter monitoring of subsidy spending and reducing leakages in welfare delivery systems.

Farm-level experiment highlights use case

The RBI’s broader push builds on pilot projects across India aimed at identifying practical applications for the e-rupee. One such experiment in Maharashtra’s Phulenagar village enabled onion farmer Samadhan Sonawane to install a drip irrigation system using subsidies transferred directly in digital rupees.

Under the pilot, the government transferred 80 per cent of the equipment cost into a digital wallet in e-rupees, with funds programmed to be spent only at approved vendors. The structure removed the need for upfront payments and reduced delays linked to reimbursements.

The pilot, jointly run by the World Bank, RBI, Maharashtra government and Punjab National Bank, is among around 10 such experiments underway across the country to assess whether the e-rupee can improve welfare delivery and curb inefficiencies in India’s roughly $80 billion subsidy ecosystem.

Limited adoption despite rising pilots

India launched the e-rupee in late 2022 as part of a broader push to modernise payment systems and reduce reliance on privately issued cryptocurrencies. However, adoption has remained limited compared with the country’s dominant Unified Payments Interface (UPI).

Transactions using the e-rupee have totalled about $3.6 billion since launch, a fraction of the more than $300 billion processed monthly through UPI.

Retail circulation falls

The RBI’s annual report also showed that retail e-rupee circulation declined during the year. Retail CBDC circulation stood at Rs 7.71 billion as of March 31, 2026, down from Rs 10.16 billion a year earlier.

The decline highlights the challenge facing policymakers as they attempt to scale consumer adoption while simultaneously expanding institutional and government-backed use cases.

Globally, nearly 50 countries are currently running CBDC pilot programmes, according to the Atlantic Council’s CBDC tracker, though only a handful have fully launched digital currencies. India and China remain among the few major economies testing programmable CBDCs at scale.

Push for cross-border use cases

Alongside domestic welfare pilots, the RBI is also accelerating efforts to test the e-rupee for international transactions.

The central bank said it had signed a digital assets collaboration pact with the Monetary Authority of Singapore and was exploring pilot projects with Singapore and the United Arab Emirates.

The RBI is also participating in multilateral CBDC initiatives led by the Bank for International Settlements (BIS), as countries explore alternatives to traditional cross-border payment systems that are often slower and costlier.

Cross-border CBDC frameworks are increasingly being viewed as a potential way to reduce settlement costs, speed up transactions and reduce dependence on existing global payment networks.

However, concerns persist over the risks associated with heavily programmed digital money and its implications for financial autonomy and user flexibility.

RBI expands digital infrastructure push

Separately, the RBI said its Indian Financial Sector (IFS) cloud platform for financial firms had gone live in beta mode with nine users, marking one of the first such initiatives by a central bank globally.

“The work on phase I of the IFS cloud services is in advanced stage,” the RBI said.

The first phase of the platform will offer basic cloud infrastructure services to financial institutions, with more advanced capabilities planned in subsequent phases.