India’s experiment with its own digital currency, the e-rupee, has hit a snag. After a successful launch in December 2022, usage has dropped significantly, according to sources familiar with the program.
The e-rupee was designed as a digital alternative to cash. Launched as a pilot program, it aimed to test the technology and see if people would adopt it. Initially, things went well. By December 2023, the program had achieved its target of 1 million daily transactions.
However, since then, things have cooled down. Transactions have fallen to just a tenth of their peak, with daily usage hovering around 250,000 to 300,000. This drop reflects challenges faced by many countries trying to introduce digital currencies.
The Reserve Bank of India (RBI), the country’s central bank, is responsible for the e-rupee. Initially, they pushed banks to boost transactions to maintain the 1 million daily target. This aimed to test the system’s ability to handle a large volume of transactions. However, that push has stopped.
The RBI’s current focus seems to be on the technical aspects of the e-rupee. They’re working on making the technology work smoothly and figuring out how people might use the digital currency in everyday life.
A source familiar with the program mentioned that adoption is likely to increase with the development of more use cases. In simpler terms, this means the RBI believes people will use the e-rupee more once they understand its benefits and how it can be used for different things.
There are a few possible reasons why usage might have dropped. Maybe people found the e-rupee confusing or inconvenient. Perhaps they simply prefer using cash or existing digital payment options.
The RBI is likely studying these reasons and working on ways to make the e-rupee more attractive. This could involve making it easier to use, offering incentives for adoption, or developing new ways to use the currency.
What is the e-rupee?
The e-rupee is a digital version of India’s official currency, the rupee. It exists electronically and can be stored on a phone or other digital device. Transactions happen online or through special apps, similar to how some people use mobile wallets today.
There are two types of e-rupee:
- Retail e-rupee: This is meant for everyday use by people like you and me. It can be used for shopping, paying bills, or sending money to friends.
- Wholesale e-rupee: This is meant for use between banks and other financial institutions for large transactions.
Why is the RBI introducing the e-rupee?
There are a few reasons the RBI might be interested in a digital currency:
- Efficiency: Digital transactions can be faster and more convenient than using cash.
- Security: Digital currencies can potentially be more secure than physical cash, which can be lost or stolen.
- Control: The RBI could have more control over the money supply with a digital currency.
What’s next for the e-rupee?
The future of the e-rupee is uncertain. The recent drop in usage is a setback, but the RBI seems committed to developing the technology.
It will likely take some time to see if the e-rupee becomes widely adopted. The RBI’s success will depend on making it user-friendly, addressing people’s concerns, and developing clear benefits for using it.