RBI to explore new use cases of digital rupee in welfare schemes and retail payments

The Reserve Bank of India (RBI) plans to expand pilots of the Central Bank Digital Currency (CBDC), or digital rupee, by introducing new use cases in government welfare programmes and the domestic retail payments ecosystem, according to its annual report released on Friday.

The central bank said it undertook multiple CBDC initiatives during 2025-26, including pilots under direct benefit transfer (DBT) schemes of the Centre and state governments, leveraging the programmability feature of the digital currency.

"In Gujarat, Puducherry and Chandigarh, public distribution system (PDS) beneficiaries were credited food subsidy through programmable CBDC, redeemable for eligible commodities at fair price shops/identified merchants," the report said.

The central bank indicated that the pilot programme would be widened in the coming months as it seeks to test additional use cases in domestic retail payments and targeted welfare delivery.

The digital rupee, introduced as a sovereign digital currency issued by the RBI, is being positioned as an alternative form of legal tender alongside physical currency.

Policymakers see programmability as one of its key advantages, allowing funds to be used only for specified purposes.

The report said the central bank is also exploring the use of CBDC beyond welfare payments.

The RBI has developed the Unified Markets Interface (UMI), a multi-layer platform designed to facilitate tokenisation of financial assets while using wholesale CBDC for settlement.

"A pilot on tokenisation of certificates of deposit (CDs) was initiated on UMI," the report noted.

The RBI is also stepping up efforts to make digital rupee usable across borders.

The report said the central bank signed a memorandum of understanding with the Monetary Authority of Singapore (MAS) on digital asset collaboration and held bilateral discussions with MAS and the Central Bank of the UAE for operationalising cross-border CBDC pilots.

The RBI has joined international initiatives led by the Bank for International Settlements (BIS) Innovation Hub, including Project Rialto and the second phase of Project Mandala, to improve cross-border payments using CBDCs.

The RBI's latest annual report suggests that future phases of the digital rupee programme will focus on expanding adoption, introducing new retail applications and integrating CBDC more deeply into government payment and benefit-transfer systems.

During 2025-26, the RBI-Digital Payments Index grew 11% year-on-year, while UPI transaction volumes crossed the 200-billion mark.