RBI’s Central Bank Digital Currency (CBDC) is set to acquire more use cases in near future. The Reserve Bank of India has decided to allow programmability and offline functionality in CBDC, a move that is expected to result in more real-life uses of the digital currency.

The Central Bank Digital Currency project is still in pilot phase. Currently, the CBDC Retail (CBDC-R) pilot enables Person to Person (P2P) and Person to Merchant (P2M) transactions. These transactions are done through Digital Rupee wallets provided by banks participating in the pilot.

What’s new

As per the bi-monthly ‘Statement on Developmental and Regulatory Policies’, the RBI has proposed to enable additional use cases using programmability and offline functionality.

“The CBDC Retail (CBDC-R) pilot currently enables Person to Person (P2P) and Person to Merchant (P2M) transactions. It is now proposed to enable additional functionalities of programmability and offline capability in CBDC retail payments. Programmability will facilitate transactions for specific/targeted purposes, while offline functionality will enable these transactions in areas with poor or limited internet connectivity,” RBI Governor Shaktikanta Das said.

Also Read: RBI MPC Meet: Beyond OTPs, Reserve Bank proposes alternative authentication for Digital Payments

How will programmability in CBDC help users?

You may be wondering how will the new RBI proposal to introduce programmability in the digital currency help users? Well, the central bank has shared some sample use cases. RBI says,

• Programmability will permit users like, for instance, government agencies to ensure that payments are made for defined benefits.
• It will enable corporates to program specified expenditures like business travel for their employees.
• Further, additional features like validity period or geographical areas within which the digital currency may be used can also be programmed.

Programmability will enable transfer of CBDC for targeted end use and time-bound transfers.

For instance, companies may be able to send a specific amount of CBDC to your wallet for targeted end-use, like paying for travel, food etc. to certain merchants.

Similarly, a company may send some CBDCs in your wallet as rewards for certain purchases within a fix time-frame. It is expected that more exciting use cases will come up due to introduction of programmability in CBDC.

How will offline functionality in CBDC help users?

The RBI says offline functionality in CBDC-R can enable transactions in areas with poor or limited internet connectivity. For this purpose, multiple offline solutions (proximity and non-proximity based) across hilly areas, rural and urban locations will be tested.

Note: The new functionalities will be introduced through the pilots in a gradual manner.

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