Introduction

A Brief History & Growth Momentum of CBDC in India

India has long been at the forefront of digital financial innovation. UPI has already set a global benchmark for real time retail payments. Building on this success, the Reserve Bank of India (RBI) has been exploring digital currency for years.

• Retail pilots extended into select cities, covering person-to-person and person- to-merchant payments.
• Retail Pilot: Started Dec 1 2022 with SBI, ICICI, Yes Bank, IDFC First; laterexpanded to 17 banks
• Wholesale Pilot: Kicked off Nov 1 2022 for interbank G-Sec settlements
• Introduced programmability (e.g., DBT, carbon credit, loan disbursals) and offline feature-phone transactions
• Retail e-Rupee value soared to ₹1,016 crore by March 2025—a nearly 10× increase from ₹103 crore in December 2023 and a fourfold jump from ₹234 crore a year prior
• Over 17 banks and nearly 6 million users are participating in pilots
• Odisha’s Subsidy Yojana: e₹ disbursed to ~88 k beneficiaries
• Ongoing pilots for DBT, KCC loans, carbon credits, and user allowances

Beyond issuing a CBDC, India has ambitious plans to implement it nationwide, integrate it with digital payment infrastructure, and use it as a tool for innovation, inclusion and global

Challenges Banks Face in CBDC Adoption

Even though the Digital Rupee sounds exciting, implementing it is not easy. Working with several banks and fintechs, I have direct experience with these issues

• Scalability Banks must process millions of CBDC transactions instantly. Unlike traditional systems, CBDC requires real-time settlement at a massive scale.
• Integration with Legacy Systems Banks still run large parts of their operations on Core Banking Systems (CBS) that were not designed for digital tokens. One of the biggest challenges is connecting CBS and CBDC platforms without interfering with day-to-day operations.
• Security and Compliance A CBDC is a sovereign digital currency. There could be systemic risks. Banks must ensure zero-trust architecture, multi-layered identity verification, and end-to-end encryption, while adhering to RBI compliance.
• User Adoption and Experience Consumers are already comfortable with UPI. For CBDC to succeed, wallets must be as seamless as UPI while offering additional benefits such as offline capability, programmable money, and cross-border settlement.
• Operational Readiness Banks must train employees, onboard merchants, and educate customers. This requires investments in awareness and capacity-building.

CBDC-as-a-Service: A Scalable Future Model

One of the most exciting concepts I’ve advocated is CBDC-as-a-Service (CBDCaaS). Not every bank has the resources of SBI or ICICI. Regional banks and cooperative banks often lack the infrastructure or budgets to deploy CBDC independently.

CBDCaaS solves this problem. Through CBDCaaS model, banks can access:

• Pre-Built Modules such as wallet APIs, settlement engines, and monitoring dashboards.
• Cloud based Deployment, ensuring scalability on demand.
• Zero-Trust Security Frameworks, including identity and access management.
• Pay-as-You-Scale Pricing, reducing upfront CapEx.

This model allows banks of all sizes to join the CBDC ecosystem quickly, securely, and cost- effectively. More importantly, it democratizes access to sovereign digital money.

Use cases – CBDC by State Bank of India

• Direct Benefit Transfer under Subhadra Yojana (Odisha) State Bank of India has started using CBDC (e-rupee) to disburse welfare payments under the Subhadra Yojana, a flagship scheme for women in Odisha. Beneficiaries receive ₹10,000 annually (in two installments) directly in their digital rupee wallets, making it the first Indian government scheme to leverage CBDC for DBT.
• Programmable Payments for Targeted Subsidies CBDC can be made programmable, allowing governments to issue fit-for-purpose money. For example, LPG subsidies or fertilizer support could be transferred in a form of e-rupee that is redeemable only for that specific purpose, ensuring policy compliance.

• Efficient & Transparent Welfare Disbursements Using CBDC for welfare ensures faster transfers, better traceability and reduced leakages. Since digital rupee transactions leave a transparent audit trail, it strengthens accountability while boosting financial inclusion.

My Experience in the Last Three Years

My personal journey with CBDC has been both challenging and rewarding. Over the past three years, I have

• Collaborated with banks and fintechs on CBDC pilots, testing how digital rupee wallets interact with UPI and merchant networks.
• Advised regulators on aligning CBDC frameworks with existing digital payments infrastructure.
• Led innovation labs where we tested offline payments, programmable money, and cross-border trade use cases.
• Championed CBDC-as-a-Service as a practical model for scaling adoption across India.

What stands out to me is that CBDC adoption is all about building trust, ensuring compliance and creating inclusive systems. Technology is an enabler, but the real success lies in designing systems that empower citizens, merchants, and banks alike.

Looking Ahead: The Future of India’s Digital Rupee

India’s CBDC journey is still in its early stages, but the trajectory is clear. With UPI as a global success story, India has the credibility and infrastructure to make CBDC adoption equally impactful.

The next five years will see

• Expansion of CBDC pilots into more cities and sectors.
• Programmable money use cases, such as targeted subsidies or corporate payouts.
• Cross-border CBDC corridors, enabling faster trade settlements.
• CBDC adoption by regional banks via CBDC-as-a-Service.

Written By Prasanna Lohar
President, India Blockchain Forum
Bank Advisor | Fintech Founder | Investor
Contact me on

• LinkedIn