India’s Digital Rupee Milestone with Mixed Reactions

India’s central bank digital currency (CBDC), the digital rupee, achieved a significant milestone on December 27, 2023, by surpassing one million transactions in a single day. However, this achievement comes with a caveat as retail banks’ own employees played a part in boosting these numbers. CoinDesk revealed that the Reserve Bank of India (RBI) Governor Shaktikanta Das acknowledged this milestone in a letter dated December 29, 2023.

The one-day spike in transactions seems to be an exception rather than the norm. The original target was to reach one million daily transactions by the end of 2023, but it’s unclear if this volume has become a daily occurrence. The RBI is currently running both retail and wholesale CBDC pilots in over 15 cities with participation from more than a dozen banks.

The RBI’s efforts to increase transaction volumes come amidst the already prevalent cashless movement in India, led by the Unified Payments Interface (UPI). The digital rupee has struggled to achieve high transaction volumes, averaging around 25,000 transactions a day.

The one million transaction mark was notably reached after several government-owned and private sector banks, including HDFC Bank, Kotak Mahindra Bank, Axis Bank, Canara Bank, IDFC First Bank, and Union Bank of India, deposited salaries and benefits of their employees into CBDC wallets.

This approach raised some concerns. The All India Union Bank Employees Federation expressed discontent, stating that the management shouldn’t compel employees to use the wallet. However, the All India Union Bank Employees Association had a different viewpoint. Its General Secretary, N. Shankar, argued that encouraging staff members to use the CBDC wallet is a reasonable strategy to increase transaction volumes and is not an inconvenience.

The RBI’s collaboration with the banking sector in promoting digital currency practices is not new. However, the extent to which banks have gone to encourage the use of the digital rupee, specifically among their own employees, is unprecedented.

As India navigates its way in the world of digital currency, the RBI’s initiative with the digital rupee marks a crucial step. While the digital rupee’s achievement of one million transactions in a day is noteworthy, the methods employed to reach this milestone and the mixed responses it has garnered reflect the complexities and challenges in the adoption of digital currencies in a country already accustomed to cashless transactions.