Date: 09 February, 2024
In a recent announcement, the Reserve Bank of India (RBI) disclosed its plans for Programmable Features to its Digital Currency by introducing programmability and offline capability. The country’s ongoing Central Bank Digital Currency (CBDC) retail pilot, initiated in late 2022, has demonstrated successful person-to-person and person-to-merchant transactions. Encouraged by this progress, the RBI aims to expand the functionality of its digital currency.
The latest monthly governor’s statement from the RBI outlined the proposed additions. The introduction of programmability will enable specific or targeted transactions, allowing government agencies to ensure payments serve defined benefits. Businesses, according to Governor Shaktikanta Das, could use programmable features to allocate funds for specific purposes like employee business travel. Moreover, the offline capability is envisioned to facilitate transactions in areas with poor or limited internet connectivity, addressing challenges in remote and mountainous regions.
To implement these advancements, the RBI plans to introduce the new features gradually through additional pilot programs. The move is seen as a strategic effort to boost economic development, with the RBI framing these initiatives as accelerators for India’s potential growth. The programmable digital rupee is expected to offer innovative solutions, tying digital cash to geographical areas and enhancing the efficiency of targeted transactions.
Beyond the digital currency enhancements, the RBI is also planning to establish a principle-based framework for authenticating digital payment transactions. While additional factor authentication methods, including SMS-based OTP, have been tested, the RBI seeks to explore more options to ensure the security and reliability of digital payments. These initiatives align with India’s broader goals of improving physical infrastructure, developing advanced digital and payments technology, fostering ease of doing business, increasing labor force participation, and enhancing the quality of fiscal spending.
References:
https://www.theregister.com/2024/02/09/india_programmable_money/
https://www.ledgerinsights.com/india-cbdc-programmable-offline/
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