The digital rupee user figures show an increase of 8.7% compared to the previous quarter and merchants have grown by 5%.

A central bank report on Currency and Finance mentioned the figures and noted that the central bank had added programmability and offline functionalities, as previously reported.

Last year three companies started working on an offline digital rupee solution. IDEMIA has won awards for its offline CBDC offering and it was working alongside Airtel Payments Bank and HMD Global, the owner of Nokia. Given around of a third of Indians use feature phones, offline CBDC is necessary as they won't have internet access.

On the programmability front, IndusInd Bank started a programmable pilot for farmers who will receive CBDC for recycling agricultural waste. Programmability is used to restrict how the funds can be spent.

This quarter the institutional participants also expanded from purely banks to non bank payment operators.

There have been many reports about the slow growth of the digital rupee. However, part of that is an issue of expectations. There was a push to have one million transactions a day in 2023. While the RBI achieved that target, it was only for a single day. Last month Reuters' sources said transactions were around 100,000 per day.

A challenge for the digital rupee is it competes with the hugely successful faster payment system UPI. Without the more advanced CBDC features, such as programmability, the benefits will not be immediately obvious to users, inhibiting adoption.

Cross border payment potential

Last year both the RBI Governor and an executive at the Ministry of Finance highlighted cross border payments as the killer app. With India's large diaspora, it is the largest recipient of inbound remittances – $120 billion in 2023.

Given the collaboration required, cross border payments will take a little time to develop. As mentioned in this week's report, India has a collaboration for cross border CBDC with the UAE. And it is an observer in mBridge, the cross border CBDC initiative from the BIS and central banks of China, Hong Kong, Thailand, the UAE and Saudi Arabia.