In just half a decade, the world has witnessed a profound shift in the monetary imagination of central banks. In 2020, thirty-five countries were exploring central bank digital currencies, or CBDCs. As of the latest count, that number has risen to one hundred and thirty-four nations representing nearly the entire global GDP. But remember—these are all experiments, not full-scale mandated adoptions.
Among them, India’s experiment by the Reserve Bank of India stands out—not merely for its scale, but for the tension it embodies between ambition and pragmatism, technological promise and behavioural inertia. Call that the market stress test.
India’s CBDC pilot, launched in December 2022, set itself an early target of one million daily transactions by the end of 2023. This figure was met, though not through organic demand, but largely because government-owned and private banks channelled much of official business, employee salaries and benefits into CBDC wallets. By March 2025, the e-Rupee in circulation had grown impressively to ₹1,016 crore, dominated by the ₹500 denomination. Today, the pilot counts about five million users and sixteen banks supporting expansion.
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Yet for all its statistical success, the retail e-Rupee remains a product in search of voluntary traction—overshadowed by the sheer ubiquity and intuitive ease of UPI.
In parallel, the wholesale e-Rupee pilot, once expected to unlock efficiency in large-value interbank settlements, is yet to gather traction and consistency of acceptance. Circulation fell sharply from ₹109 million in the previous financial year to just ₹0.8 million in FY 2023–24. Does this drop suggest that, for now, banks see limited incremental value in CBDC over established systems like RTGS or NEFT? If so, a gap policymakers must address, if wholesale adoption is to scale.
Between vision and everyday use
To appreciate why India’s CBDC now appears stalled, one must look beyond numbers to the architecture of its digital economy. The Reserve Bank of India has rightly articulated the theoretical benefits: reduced cash dependence, lower currency management costs, enhanced traceability, and stronger control over monetary policy levers. In principle, CBDCs can ease settlement risk, curb counterfeiting, and through blockchain, enable programmability and resilience. Over time, they could reduce the friction and cost of cross-border payments, potentially boosting trade and investment. Indeed, RBI’s latest annual report underlines its ambition to explore cross-border pilots and integrate CBDC into large-value payment systems.
Yet in practice, several factors weigh heavily on adoption. Foremost is the formidable incumbency of UPI, whose real-time interoperability and user experience have fundamentally altered payment habits. UPI’s share of India’s digital payment volume has surged. Consumers can send precise sums—down to the smallest unit—without worrying about denominations.
While fundamentally, UPI is a transfer mechanism and the CBDC is money itself, their real-world impact diverges sharply. UPI’s strength lies in its fine-grained flexibility: users transfer exact amounts instantly, supported by merchant cashbacks and seamless integration into daily life.
By contrast, the CBDC requires preloaded denominations—₹500, ₹200, or ₹100—which feels rigid in the fluidity modern users expect. UPI’s design also remains largely neutral from a privacy perspective, whereas CBDC, by virtue of its ledger, creates a fully traceable trail, fuelling legitimate anxieties over government monitoring.
CBDC’s theoretical advantages—legal tender status, programmability, resistance to counterfeiting—matter most for large-value payments, cross-border trade and monetary policy. Yet to consumers, these benefits seem abstract beside UPI’s immediacy, rewards, and trust built over billions of transactions. The absence of loyalty points, cashback, credit or interest-bearing capability further limits CBDC’s attractiveness to users already served by mature digital systems.
It is telling that much of the pilot’s retail volume so far comes from state salaries, government benefits and reimbursements to RBI employees. Such forced sandboxing may boost adoption figures but does little to foster genuine user preference. Meanwhile, countries like Nigeria, Jamaica, the Bahamas and Anguilla show that a national launch alone does not guarantee mass usage if better alternatives exist.
Equally, India’s CBDC vision is driven by macroeconomic and strategic aims beyond retail payments: formalising parts of the shadow economy, improving liquidity control, and enhancing global trade competitiveness through cheaper cross-border flows. The RBI’s cautious, phased pilot reflects an intent to learn iteratively and avoid reputational risk. Yet so far, this careful posture has not resolved the challenge of voluntary retail demand.
Credit, cards and consumer behaviour
Credit cards, too, illustrate the gap between sovereign design and market reality. Unlike CBDC’s cash-like model, credit cards are instruments of deferred payment embedded in lifestyles through credit cycles, loyalty programmes and protections. For many consumers, rewards points, zero-cost EMIs and purchase protections create real value that shapes spending choices—features the e-Rupee does not replicate.
Beyond incentives, credit cards offer a mature, resilient infrastructure that CBDC-R has yet to emulate. Though CBDC could theoretically embed programmable credit or micro-lending, these remain speculative; the pilot has not meaningfully tested such functions.
Importantly, credit cards complement rather than displace real-time systems like UPI. By contrast, CBDC’s current retail pilot risks competing directly without distinctive advantages.
CBDC — From pilot to purpose
None of this diminishes the RBI’s achievement in laying sovereign digital rails. Its caution avoids the pitfalls of a premature full launch. Yet moving from pilot to genuine use demands more than technical readiness.
It must show everyday users why the e-Rupee matters, beyond being a government project. That could mean real incentives, integration into retail life, or cross-border value. It must balance transparency with privacy, protecting personal data. It must complement—not compete awkwardly with—UPI and cards. And the sharp fall in wholesale volumes signals the need to revisit whether CBDC offers banks and large corporates something unique.
In truth, the near-term opportunity may lie less in retail wallets than in B2B and wholesale, where programmable money and final settlement address clear institutional needs. For now, India’s e-Rupee feels more like a policy-led experiment than a market-validated tool. Its future depends on moving beyond mandated adoption towards genuine consumer choice. After all, Innovation is not only building the rails, but inspiring the journey upon them.