What is CBDC / Digital Rupee (e₹)?

Central Bank Digital Currency (CBDC) is the digital form of sovereign currency issued directly by a country’s central bank. India’s CBDC, called the Digital Rupee (e₹) or e-rupee, is a tokenised digital version of the Indian rupee issued by the Reserve Bank of India (RBI). Unlike digital payments through UPI or NEFT — which transfer funds between bank accounts — the e₹ is a direct liability of the central bank itself, functioning as legal tender at par with physical cash¹².

The RBI launched the wholesale CBDC (e₹-W) on 1 November 2022 for interbank settlements, followed by the retail CBDC (e₹-R) on 1 December 2022 for person-to-person and person-to-merchant transactions³⁴. India is one of only a handful of major economies to have launched both wholesale and retail CBDC pilots⁵.

How it Works

Core Mechanism

• Tokenised Digital Notes: e₹ is available in the same denominations as physical currency (e₹1, e₹2, e₹5, e₹10, e₹20, e₹50, e₹100, e₹200, e₹500, e₹2,000), providing users with familiar cash-like experience⁶
• Digital Wallets: Users store e₹ in digital wallets provided by participating banks and non-bank entities, downloadable from the Play Store or App Store⁶
• Direct Liability of RBI: Unlike UPI (which settles between bank accounts), e₹ is a direct claim on the RBI’s balance sheet, offering “finality of settlement” without bank intermediation²⁷
• No Interest: Since e₹ is designed to be cash-like, no interest is payable on wallet balances⁶

Transaction Flow

1. User downloads the e₹ wallet app from a participating bank or non-bank
2. User registers and loads e₹ from their linked savings account (currently, wallets are linked to bank accounts for KYC)⁶
3. For P2P/P2M payments at CBDC QR codes, transactions happen directly between wallets — no bank account intermediation⁶
4. For UPI QR code payments, settlement follows UPI timelines (not instant like CBDC-to-CBDC)⁶
5. Users can redeem e₹ back to their bank account at any time

Key Features

• UPI QR Interoperability: e₹ wallets can scan existing UPI QR codes, eliminating the need for merchants to set up separate CBDC infrastructure³
• Offline Payments: Launched at Global Fintech Fest 2025, allowing transactions in areas with limited or no internet connectivity via NFC and telecom-based solutions⁸
• Programmability: Funds can be programmed for specific purposes — e.g., government subsidy transfers spendable only at registered vendors, or employee allowances for defined categories⁶⁹
• 24x7 Availability: e₹ can be loaded, redeemed, or transferred round the clock⁶
• No Minimum Balance: No minimum balance required to open or maintain an e₹ wallet⁶
• Recovery: Unlike physical cash, e₹ can be recovered if a device is lost, using the same phone number/SIM on a new device⁶

Key Statistics

Key trend: Despite significant expansion, retail e₹ circulation declined 24% from ₹1,016 crore to ₹771.66 crore between March 2025 and March 2026, highlighting the persistent adoption challenge¹⁰.

Types/Categories

1. Retail CBDC (e₹-R)

• Intended for the general public — everyday transactions like physical cash but in digital form
• P2P (person-to-person) and P2M (person-to-merchant) payments
• Transaction limit: ₹10,000 per transaction; ₹50,000 daily (via non-bank wallets like MobiKwik/CRED)¹²
• No interest on balances
• Available in same denominations as physical currency

2. Wholesale CBDC (e₹-W)

• Designed for financial institutions and intermediaries
• Streamlines interbank settlements and large-value transactions
• Use cases: (i) settlement of secondary market government securities, (ii) interbank call money market lending/borrowing, (iii) tokenised Certificate of Deposits⁶
• Uses programmability and smart contracts for automated settlement
• Reduces settlement risk and transaction costs by eliminating the need for settlement guarantee infrastructure⁶

3. Programmable CBDC

• Funds can be programmed with conditions: expiry dates, geo-location limits, merchant category codes, specific merchant VPAs⁶
• Current pilots: Direct Benefit Transfers (DBT), interest subvention schemes, targeted lending, employee allowances, carbon credit payments to farmers⁹⁵
• Welfare pilots: ~10 experiments underway across India routing portions of the ~$80 billion subsidy ecosystem through e₹¹⁰

4. Offline CBDC

• Launched 2025, enables payments without internet
• Two approaches: telecom-based (needs cellular connectivity but not internet) and NFC-based (via merchant POS terminals)⁸
• Daily wallet transaction limit: ₹50,000 through partner banks⁸

Major Players

Central Bank

• Reserve Bank of India (RBI): Sole issuer and regulator of the Digital Rupee²

Infrastructure

• National Payments Corporation of India (NPCI): Manages backend infrastructure for the CBDC system³
• Reserve Bank Innovation Hub (RBIH): Develops proof of concept and runs pilot projects³

Participating Banks (Retail — 19 banks as of April 2026)⁶

Non-Bank Wallet Providers (as of January 2025)¹²¹³

• MobiKwik: First fintech to offer full CBDC wallet launch
• CRED: First non-bank to launch e₹ wallet for users

Merchant Acceptance

• Reliance Retail: First large organised retail chain to accept e₹ (with ICICI Bank and Kotak Mahindra Bank)³
• CCAvenue: First payment gateway to process e₹ for online retail³
• Indraprastha Gas: e₹ acceptance at select NCR gas stations (with IndusInd Bank)³

Regulatory Framework

Legal Foundation

• Section 26, RBI Act, 1934: The foundational legal provision — every bank note (including digital) shall be legal tender at any place in India¹⁴¹⁵
• Finance Act, 2022: Amended the RBI Act, 1934 to explicitly empower the RBI to issue CBDC³¹⁵
• Coinage Act, 2011, FEMA 1999, IT Act, 2000: Additional legislative frameworks under review for CBDC governance³
• Legal Tender Status: e₹ is legal tender guaranteed by the Central Government, at par with physical currency⁶¹⁴

RBI Oversight

• The RBI is the sole authority for CBDC issuance, design, and regulation²
• The RBI’s Concept Note on CBDC (October 2022) establishes the design philosophy: “as close as possible to physical cash” while ensuring safety, security, and robustness²¹⁶
• CBDC and Asset Tokenisation (CAT) Sandbox: RBI sandbox for testing interoperability, programmability, and new business models in a non-live environment⁶

Key Regulatory Milestones

• October 2022: RBI publishes Concept Note on CBDC¹⁶
• November 2022: Wholesale CBDC pilot launched (e₹-W)³
• December 2022: Retail CBDC pilot launched (e₹-R)⁴
• August 2023: UPI QR interoperability begins rollout across banks³
• August 2024: Programmability expanded to fuel, groceries, education, dining, healthcare, travel⁹
• December 2024: 1 million daily transactions target achieved (temporarily)⁵
• January 2025: Non-bank entities (MobiKwik, CRED) permitted to offer CBDC wallets¹²
• September 2025: Offline CBDC feature launched at Global Fintech Fest⁸
• October 2025: CBDC Hackathon announced (tokenised KYC, offline CBDC, trust enhancement)⁵
• May 2026: RBI annual report announces cross-border CBDC pilots and welfare scheme expansion plans¹⁰

Data Protection Framework

• The RBI Concept Note acknowledges that “privacy and data protection is an issue of concern” and should be “considered carefully when designing CBDCs”¹⁶
• e₹ transaction data is governed by the Digital Personal Data Protection Act, 2023 (DPDPA) — the RBI may be classified as a “data fiduciary” with participating banks as “data processors”¹⁷
• Data localisation requirements apply under RBI guidelines for payment systems

Consumer Rights Analysis

Right to Legal Tender

The e₹ is legal tender guaranteed by the Central Government under Section 26 of the RBI Act, 1934¹⁴. This means no one in India can legally refuse to accept e₹ as payment, once the pilot transitions to full rollout. However, during the pilot phase, acceptance is limited to participating merchants.

Right to Zero-Fee Access

• The RBI mandates no charges or fees for using e₹ or e₹ wallets⁶
• Unlike some UPI transactions (above ₹2,000 for P2M), e₹ transactions carry no fees at all
• No minimum balance requirement eliminates financial exclusion barriers⁶

Right to Recovery

Unlike physical cash, which if lost is gone forever, e₹ wallets can be recovered on a new device using the same phone number and SIM. This is a meaningful consumer protection not available with cash⁶.

Right to Privacy (See Privacy section below)

Right to Grievance Redressal

• Users can raise disputes via their e₹ wallet app or contact their bank’s customer care⁶
• Refunds/reversals for failed transactions are processed within T+2 working days¹⁸
• Banks’ existing grievance redressal mechanisms and nodal officers apply to e₹ wallets¹⁸
• RBI Integrated Ombudsman scheme covers CBDC-related complaints against participating banks¹⁹

Right to Financial Inclusion

• No minimum balance requirement
• No savings account charges (beyond existing bank account fees)
• Offline feature extends access to areas with limited connectivity⁸
• Linkage to Aadhaar/Jan Dhan ecosystem could potentially extend CBDC to the unbanked (not yet implemented)

Privacy Implications

This is arguably the most critical consumer concern with CBDCs globally.

What the RBI Says

The RBI’s 2021 report stated that CBDCs “can be designed to promote non-anonymity at the individual level, monitor transactions”²⁰. The October 2022 Concept Note further stated that an advantage of retail CBDC is that “the central bank has complete knowledge of retail account balances”²⁰. While the Concept Note acknowledges privacy as a concern and proposes “managed anonymity” (lower anonymity for higher-value transactions), the architecture fundamentally enables comprehensive transaction surveillance¹⁶¹⁷.

Data Collection Risks

1. Complete Transaction Trail: As a centrally issued digital currency, every e₹ transaction is recorded on the RBI’s infrastructure. Unlike physical cash (which leaves no trail), e₹ creates a comprehensive record of what you buy, where, when, and from whom²²⁰
2. Behavioural Profiling: Transaction patterns — spending categories, merchant preferences, timing, frequency — can reveal intimate details about a person’s life, health, politics, and associations²¹
3. Programmability Enables Conditional Access: Programmable money that can be restricted to certain merchants or categories inherently requires monitoring of how and where money is spent⁹
4. Government Access: As the issuer, the government can potentially access CBDC transaction data for surveillance or enforcement purposes without the judicial oversight required for bank account freezes²⁰

Surveillance Context

India’s human rights and civil liberties context amplifies these concerns:

• Freedom House rates India 66/100 on freedom, noting that “harassment of journalists, NGOs, and other government critics has increased significantly” and that “government institutions are increasingly used to target political opponents”²⁰
• In 2024, the government froze the bank accounts of the principal opposition party ahead of national elections citing unpaid taxes²⁰
• Reports of innocent citizens having bank accounts frozen during crime investigations, with account holders required to “prove their innocence” — a process that can take months or years²⁰
• A CBDC would make such actions significantly easier by providing direct, programmable control over each citizen’s finances²⁰

Privacy Safeguards (Proposed, Not Fully Implemented)

1. Managed Anonymity: RBI proposes different privacy levels based on transaction value — small transactions get more anonymity than large ones¹⁶
2. No Interest Design: By not paying interest, the RBI reduces the incentive for large-scale migration of deposits from banks to CBDC, limiting the data footprint⁶
3. Wallet Model: Transactions happen between wallets rather than through bank accounts for CBDC-to-CBDC transfers, potentially reducing data exposure to intermediaries⁶
4. DPDPA Coverage: The Digital Personal Data Protection Act provides some statutory data protection, though enforcement mechanisms are still maturing¹⁷

⚠️ Critical Gap

India lacks a dedicated CBDC privacy law. The RBI’s Concept Note acknowledges the need for “defined privacy principles and data subjects’ rights” but does not establish binding legal protections specific to CBDC data¹⁶. The DPDPA provides general data protection, but central bank data may be exempt under certain provisions, and the act’s enforcement record is nascent¹⁷.

Safeguards

Technical Safeguards

1. Wallet Recovery: e₹ is safe even if the device is lost; wallet can be restored on a new device using the same SIM/phone number⁶
2. Robust Cybersecurity Framework: The RBI describes a “robust cyber-security framework to ensure that e₹ is kept secure in the user’s wallet”⁶
3. Two-Factor Authentication: Wallet access requires secure authentication
4. Denomination-Level Storage: e₹ stored in familiar denominations (₹10, ₹50, ₹100, etc.) provides cash-like mental model and spending discipline⁶

Consumer Safeguards

1. No Fees: Zero transaction charges for all e₹ operations⁶
2. Instant Settlement: CBDC-to-CBDC transactions settle instantaneously without bank intermediation⁶
3. Change Return: Automatic change calculation — if paying ₹15 from a ₹20 note, ₹5 is returned to wallet⁶
4. 24x7 Access: Load, redeem, transfer anytime⁶

Procedural Safeguards

1. Report Issues to Wallet Provider: Raise disputes via the e₹ app or bank’s customer care⁶
2. Escalate to Bank Grievance Cell: If wallet provider doesn’t resolve within stipulated time
3. RBI Integrated Ombudsman: File complaints at cms.rbi.org.in for unresolved issues¹⁹
4. Document Everything: Keep transaction screenshots, IDs, and timestamps

What e₹ Does NOT Have (Compared to Cash)

Complaints & Grievance Redressal

Step-by-Step Redressal Process

1. In-App Dispute Resolution:

   • Raise dispute via the e₹ wallet app
   • Contact wallet provider’s customer care
   • Failed transaction refunds processed within T+2 working days¹⁸

2. Bank Grievance Cell:

   • If the wallet provider (bank) does not resolve the issue
   • Approach the bank’s internal grievance redressal mechanism
   • All participating banks have designated Nodal Officers for CBDC-related complaints¹⁸

3. RBI Integrated Ombudsman:

   • File complaint online: cms.rbi.org.in¹⁹
   • Covers all regulated entities including CBDC-participating banks
   • Decision is binding on the regulated entity

4. Consumer Courts:

   • For issues not resolved through banking channels
   • Consumer Protection Act, 2019 applies to CBDC services

Key Redressal Mechanisms

• Wallet-level dispute filing: Built into every e₹ app
• Bank-level escalation: Designated Nodal Officers at each participating bank
• RBI Ombudsman: Free, binding redressal for unresolved complaints
• DPDPA Grievance: Data privacy violations can be reported to the Data Protection Board under DPDPA 2023

Expected Resolution Times

• Failed transaction reversal: T+2 working days¹⁸
• Bank internal grievance: 7-30 days (RBI guideline)
• RBI Integrated Ombudsman: 30-60 days

Cross-Border and International Context

The RBI is actively exploring cross-border CBDC use cases¹⁰:

• Bilateral pilots: Discussions with 4-5 countries including Singapore (MAS), UAE (CBUAE), and select European economies¹⁰
• BRICS CBDC: India is pushing for linking CBDCs across BRICS nations, which could reduce reliance on the US dollar for trade settlements but raises geopolitical concerns²²
• BIS Projects: Participation in multilateral CBDC initiatives led by the Bank for International Settlements (BIS), including Project mBridge¹⁰
• Digital Assets Pact: Signed with Singapore’s Monetary Authority for cross-border payment collaboration¹⁰

India is among only six countries globally with a launched CBDC, alongside China (digital yuan), Nigeria (eNaira), Bahamas (Sand Dollar), Jamaica (JamDex), and Russia (digital ruble)².

Prime References