In the vibrant city of Mumbai, patrons of the digital rupee will soon wield the power to conduct transactions seamlessly in regions grappling with sparse internet connectivity. The Reserve Bank of India (RBI) declared on Thursday the imminent integration of offline capabilities into the Central Bank Digital Currency (CBDC) pilot initiative. Shaktikanta Das, the Governor of the RBI, articulated that the pilot project would introduce programmability-based additional use cases.
Initiated in December 2022, the retail CBDC pilot garnered success by accomplishing a daily transaction count of 10 lakh in December 2023. Notably, various payment platforms, notably the immensely popular Unified Payments Interface (UPI), already offer offline functionalities. While unveiling the bi-monthly monetary policy review, Das elucidated, “It is proposed to introduce an offline functionality in CBDC-R (Retail) for enabling transactions in areas with poor or limited internet connectivity.”
Das further expounded on the diverse array of offline solutions, encompassing both proximity and non-proximity-based alternatives, to be trialed across diverse terrains such as hilly landscapes, rural expanses, and urban domains. Regarding programmability, he highlighted that the existing system facilitates Person to Person (P2P) and Person to Merchant (P2M) transactions via digital rupee wallets issued by pilot banks.
Expanding the horizons, Das proposed the integration of additional use cases through programmability and offline functionality. The programmability facet would empower entities like government agencies to ensure payments for predefined benefits. Corporates, too, would gain the ability to program specific expenditures, such as business travel for their employees.
Innovative features, such as defining validity periods or geographical restrictions for CBDC usage, can also be encoded, he asserted. Simultaneously, Das disclosed the RBI’s intent to bolster the security features of Aadhaar-enabled Payment Systems (AePS), utilized by 37 crore individuals in 2023. “To fortify the security of AePS transactions, the proposition is to streamline the onboarding process, incorporating mandatory due diligence for AePS touch point operators, to be enforced by banks,” Das stated, with forthcoming instructions on the matter.
Presently, he acknowledged the prevalent use of the SMS method by lenders to adhere to additional factor authentication requirements. However, he emphasized the need to embrace technology advancements, proposing the adoption of a principle-based “Framework for authentication of digital payment transactions” to facilitate secure digital mechanisms.