The Reserve Bank of India (RBI) launched the Digital Rupee (e₹) under the RBI Act, 1934, as a programmable legal tender designed to modernize payment systems and enhance monetary transparency across the domestic financial ecosystem.

Two-Tier Architecture of Central Bank Digital Currency (CBDC)

Working Mechanism of the Digital Rupee

1. Two-Tier Model: The RBI issues tokens to commercial banks for distribution to users.

   • Eg: 19 banks in the retail pilot by October 2025.

2. Token-Based System: Holders prove ownership of specific digital tokens to complete transactions.

   • Eg: CBDC wallets from banks or Non-Bank Payment System Operators.

3. Programmable Functionality: Funds are hardcoded for specific purposes to ensure intended outcomes.

   • Eg: CBDC-based Public Distribution System in Gujarat, February 2026.

4. Finality of Settlement: Transactions achieve instant settlement without interbank clearinghouse processes.

5. Offline Capabilities: The system facilitates transactions via Near Field Communication (NFC) without internet.

Progress of India's CBDC Pilot

1. Scale of Adoption: The retail pilot reached 7 million users by October 2025.

2. Circulation Dynamics: The RBI Annual Report 2025-26 recorded CBDC-Retail at Rs 771.66 crore on March 31, 2026.

3. Cross-Border Integration: India signed a pact with Singapore and explores projects with the United Arab Emirates.

4. Direct Benefit Transfer: Pilots in Puducherry and Chandigarh utilized e-rupee for welfare payments during 2025-26.

5. Technological Expansion: Future rollouts allow PhonePe and Google Pay to offer digital wallets.

By leveraging the G20 Roadmap for cross-border payments and the National Strategy on Blockchain, India aims to modernize its monetary architecture. This aligns with the Digital India mission to enhance financial stability and inclusion.