RBI on Thursday announced the introduction of offline capability to the Central bank digital currency (CBDC) pilot project. Which means soon, the users of the digital rupee will have the ability to conduct transactions even in areas with limited internet connectivity.
Governor Shaktikanta Das stated that additional use cases based on programmability will be incorporated as part of the pilot project.
The RBI initiated a pilot of the retail CBDC in December 2022 and successfully achieved the goal of facilitating 10 lakh transactions per day by December 2023. It is noteworthy that other payment platforms, particularly the widely-used Unified Payments Interface (UPI), already provide offline functionalities.
Say of Shaktikanta Das
“It is proposed to introduce an offline functionality in CBDC-R (Retail) for enabling transactions in areas with poor or limited internet connectivity,” stated Das during the announcement of the bi-monthly monetary policy review.
To achieve this objective, various offline solutions, including both proximity and non-proximity based ones, will be tested in hilly areas, rural, and urban locations, he further elaborated.
Regarding programmability, Das mentioned that the system currently facilitates Person to Person (P2P) and Person to Merchant (P2M) transactions using digital rupee wallets offered by pilot banks.
It is now proposed to enable additional use cases using programmability and offline functionality,” he elaborated.
Implications for Users
The programmability feature will empower users such as government agencies to ensure that payments are directed towards defined benefits. He also highlighted that enterprises will have the opportunity to utilize this feature for specific expenses, such as business travel for their employees.
Moreover, additional attributes such as validity periods or designated geographical areas where CBDC may be utilized can be programmed using this feature, he added.
“To enhance the security of AePS( Aadhar enabled Payment System) transactions, it is proposed to streamline the onboarding process, including mandatory due diligence, for AePS touch point operators, to be followed by banks,” Das highlighted.
Currently, lenders are using SMS for complying with the additional factor authentication requirements.
However, he added that advancements in technology have opened up newer means.
“To facilitate the utilization of these mechanisms for digital security, it is proposed to adopt a principle-based ‘Framework for authentication of digital payment transactions’,” he explained.
What is CBDC?
Central bank digital currencies (CBDCs) are a form of digital currency issued by a country’s central bank. They are similar to cryptocurrencies, except that their value is fixed by the central bank and equivalent to the country’s fiat currency.
Many countries are developing CBDCs, and some have even implemented them. Because so many countries are researching ways to transition to digital currencies.
E- Rupees
National Payments Corporation of India (NPCI) in association with Department of Financial Services (DFS), National Health Authority (NHA), Ministry of Health and Family Welfare (MoHFW), and partner banks, has launched an innovative digital solution – ‘e-RUPI’.
The users of this seamless one-time payment mechanism will be able to redeem the voucher without a card, digital payments app or internet banking access, at the merchants accepting e-RUPI. e-RUPI would be shared with the beneficiaries for a specific purpose or activity by organizations or Government via SMS or QR code.
This contactless e-RUPI is easy, safe and secure as it keeps the details of the beneficiaries completely confidential. The entire transaction process through this voucher is relatively faster and at the same time reliable, as the required amount is already stored in the voucher.
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