The Reserve Bank of India launched its retail digital rupee (e-Rupee) pilot in December 2022. More than three years later, the picture is complicated. The technology works, the infrastructure is solid, but adoption has been stubbornly slow. Understanding why tells us a lot about what CBDCs can and can’t do.

The Numbers

RBI hasn’t been particularly transparent about detailed CBDC metrics, but what data is available paints a modest picture. As of early 2026, daily transaction volumes for the retail e-Rupee hover around 10-15 lakh transactions per day. Compare that to UPI’s 50+ crore daily transactions, and the scale difference is stark.

The pilot initially included eight banks and has expanded to include more participants. Merchants accepting e-Rupee have grown into the hundreds of thousands, but active usage remains concentrated in a few cities and among a relatively small number of users.

According to RBI’s published data, the wholesale CBDC pilot for interbank settlement has shown more promise in terms of reducing settlement times, but the retail side — the one that matters for consumer adoption — has underwhelmed.

Why Adoption Has Been Slow

The fundamental problem is competition from UPI. India already has a digital payment system that’s fast, free for most users, widely accepted, and deeply integrated into daily life. The e-Rupee doesn’t offer a compelling reason to switch.

For consumers, the user experience of paying with e-Rupee is essentially the same as paying with UPI — scan a QR code, enter an amount, confirm. There’s no visible benefit to using one over the other. In fact, UPI is arguably more convenient because it’s linked directly to bank accounts and doesn’t require pre-loading a wallet.

The offline payment capability of e-Rupee was supposed to be a differentiator. In theory, CBDC transactions can work without internet connectivity, addressing the needs of rural areas with patchy network coverage. In practice, the offline functionality has been limited in the pilot, and the use cases where it matters are narrow.

For merchants, accepting e-Rupee means another payment terminal or QR code to manage. Most merchants already handle cash, UPI, and cards. Adding another payment method without clear demand from customers creates complexity without benefit.

Technical Lessons

On the positive side, the technical infrastructure has performed well. The e-Rupee system handles transactions reliably, settlement is instant, and the programmability features — while underutilized — work as designed.

Programmable payments are perhaps the most interesting technical outcome. The e-Rupee can carry conditions — funds that can only be spent on specific categories, expire after a certain date, or require certain verification before use. This has potential applications in government subsidy distribution, where leakage and misuse are persistent problems.

The DBT (Direct Benefit Transfer) use case for programmable CBDC is compelling on paper. Imagine agricultural subsidies distributed as e-Rupees that can only be spent at registered agricultural input suppliers. No diversion, no leakage, automatic compliance tracking.

Several pilot programs have tested this concept with small-scale subsidy disbursements. The results are promising technically, but the implementation complexity of defining spending rules, managing exceptions, and handling edge cases is substantial.

Token-based architecture vs account-based architecture has been a key design decision. RBI has opted for a token-based model for retail CBDC, where digital rupees exist as tokens in a wallet rather than as balance entries in an account. This provides more anonymity than account-based systems but creates challenges for transaction monitoring and AML compliance.

Interoperability with existing payment rails is partially solved. E-Rupee wallets can be accessed through the same bank apps used for UPI, reducing the friction of managing a separate app. But deep integration — allowing e-Rupee to work through the same QR codes and payment workflows as UPI — is still being developed.

Policy Questions

Privacy vs surveillance is the central tension. A CBDC gives the central bank theoretical visibility into every transaction. While RBI has stated that the e-Rupee will offer “a degree of anonymity” for small transactions, the details of what that means in practice remain unclear.

For a country that already has Aadhaar-linked bank accounts and UPI transaction trails, the incremental privacy concern from CBDC might seem marginal. But the principle matters — a well-designed CBDC could actually improve financial privacy compared to the current system where banks see all transactions.

Impact on bank deposits is a concern that’s received significant attention from the banking industry. If consumers hold significant amounts of e-Rupee instead of bank deposits, it could reduce banks’ deposit base and therefore their lending capacity.

RBI has addressed this by placing limits on e-Rupee wallet holdings, currently at one lakh for individuals. This caps the potential deposit displacement but also limits the usefulness of e-Rupee for larger transactions.

Cross-border CBDC is where things get genuinely interesting. The BIS Innovation Hub has been coordinating multiple CBDC interoperability projects, including Project mBridge which connects central banks in China, Hong Kong, Thailand, and the UAE. India hasn’t joined mBridge but has engaged in bilateral discussions about CBDC-to-CBDC settlement.

If cross-border CBDC settlement matures, it could reduce India’s dependence on correspondent banking and SWIFT for international transactions. For a country that receives over $100 billion in remittances annually, cheaper and faster cross-border transfers have enormous economic significance.

International Comparisons

China’s digital yuan is the closest comparable, operating at larger scale but facing similar adoption challenges. Nigeria’s eNaira had an even rockier start. The Bahamas’ Sand Dollar is live but in a tiny economy. Sweden’s e-Krona has been in pilot for years without a launch decision.

The pattern across countries is consistent: building the technology is the easy part. Convincing people to use it when existing digital payment systems already work is the hard part.

The countries where CBDC might find the strongest immediate use case are those without well-developed digital payment infrastructure — where CBDC could leapfrog the gap rather than compete with an incumbent. India, with UPI already deeply embedded, doesn’t fit that profile.

Where the Digital Rupee Might Actually Succeed

Government payments remain the strongest use case. Direct benefit transfers, tax refunds, procurement payments — these don’t require consumer adoption because the government can mandate payment in e-Rupee for specific programs.

Corporate settlement using wholesale CBDC has shown genuine efficiency gains in the pilot. Interbank settlement in real time without collateral requirements reduces systemic risk and frees up capital. This is less visible to the public but potentially more impactful.

Financial inclusion for populations without smartphone access could work if the offline capability matures. Feature phone-based CBDC transactions using USSD menus could serve segments that UPI’s app-dependent model misses.

The digital rupee isn’t a failure. The pilot has produced valuable technical and policy insights, and the infrastructure built will have lasting value. But the initial vision of CBDC as a widely-used consumer payment method hasn’t materialized, and the path to significant adoption remains unclear.

RBI appears to be shifting its strategy, focusing less on consumer adoption volume and more on specific use cases where CBDC adds clear value. That’s probably the right approach. The digital rupee doesn’t need to replace UPI — it needs to do things UPI can’t.