India’s central bank digital currency, the Digital Rupee or e₹, moved beyond a limited closed-user experiment in 2025 to become what RBI Governor Sanjay Malhotra described in October as “one of the largest sovereign digital currency pilots in the world.” The milestone was reached against the backdrop of a payment ecosystem already dominated by UPI — a challenge that the Reserve Bank has acknowledged openly, even as it has introduced new features designed to expand the e-rupee’s relevance beyond early adopters.
Where the Pilot Stands
Speaking at the Global Fintech Fest 2025 in Mumbai in October, RBI Governor Sanjay Malhotra stated that the retail pilot of the Digital Rupee now includes 19 banks and 7 million users. World Bank By March 2025, the e-rupee’s circulation had reached ₹1,016 crore — a 334 per cent increase in one year — though the figure remains modest relative to both the volume of physical cash in circulation and the scale of UPI transactions. Worldbank
The RBI’s updated FAQ on the Digital Rupee, last revised on February 4, 2026, confirms that 19 banks are currently offering CBDC wallets to customers. The e₹ is issued by the RBI in digital form and is at par with physical currency, offering features similar to physical cash including convenience, RBI guarantee, and finality of settlement. It is stored in the user’s digital wallet and can be used to send and receive money and make payments for transactions, just like a physical note.
By 2026, the RBI’s focus has shifted from transaction volumes to testing specific use cases — including programmability and offline functionality — that differentiate the e-rupee from existing instruments rather than replicate them. International Monetary Fund
The Offline Feature: A Step Toward ‘Cash, But Digital’
The most consequential feature introduced in the current phase of the pilot is the offline payment capability, announced at the Global Fintech Fest 2025. The offline digital rupee, launched at the Global Fintech Fest 2025 in Mumbai, allows payments to be made using minimal network signals or NFC-based tap technology, enabling transactions in remote or rural areas without requiring constant internet connectivity. The pilot includes 15 banks, with wallets available on both Google Play Store and the Apple App Store.
The feature supports both person-to-person transfers and person-to-merchant payments, and is interoperable with existing UPI QR code infrastructure, meaning users do not need a separate QR code network to transact. The RBI and participating banks have described the offline digital rupee as potentially cheaper and faster than UPI for certain transactions, as it eliminates intermediary switches and payment gateways. Worldbank
The offline capability addresses one of the e-rupee’s clearest differentiated use cases: transactions in low-connectivity zones where UPI fails or is unavailable. Physical cash currently fills this function in rural India; the offline e-rupee is designed to provide an equivalent that is traceable by the RBI and eliminates the logistics of cash distribution.
Programmable Money: Early Government Use Cases
The e-rupee’s programmable features — which allow funds to be restricted to specific purposes, expiry dates, geolocations, or merchant categories — are already deployed in select government schemes. These include Gujarat’s G-SAFAL programme and Andhra Pradesh’s DEEPAM 2.0, both of which use programmable CBDC for targeted subsidy delivery.
Governor Malhotra specifically highlighted Gujarat’s Saathi Scheme, which employs programmable CBDC for geo-fenced agricultural subsidies that can only be spent at designated agricultural input vendors. World Bank The design addresses a longstanding challenge in direct benefit transfers: ensuring that subsidised funds reach the intended recipient and are used for the intended purpose, rather than being diverted or misused.
The programmability function is being tested in controlled pilots and has not yet been fully deployed at scale. United Nations Broader rollout across central government schemes, such as fertiliser or food subsidies, has not been announced as of the date of this report.
The Bank Account Requirement: A Key Limitation for Financial Inclusion
The research supplied with this assignment characterised the e-rupee as eliminating the need for a bank account — a claim frequently made in advocacy around CBDC. The RBI’s own documentation contradicts this for the current phase of the pilot.
The RBI’s FAQ on the Digital Rupee, updated as of February 4, 2026, states clearly: “Currently, opening of e₹ wallets is linked to user’s saving accounts.” Libertify The word “currently” implies this constraint may be relaxed in future iterations, but as of now, the e-rupee is not accessible to individuals without a bank account. The financial inclusion benefit that would flow from a bank-account-independent digital currency — particularly for the estimated tens of millions of adults who remain outside the formal banking system — has not yet been operationalised.
The UPI Comparison: Complementary, Not Competitive
As of September 2025, UPI processed over 20 billion transactions worth nearly ₹24.9 lakh crore in a single month, accounting for approximately 85 per cent of India’s digital transaction volume and close to 50 per cent of global real-time payments by volume. Uptake of the Digital Rupee is gradual, in part due to UPI’s existing dominance and public trust in bank-led digital payments. ThePrint
The distinction between the two instruments is structural, not merely a question of familiarity. UPI is a payment platform that facilitates bank-to-bank transfers. The e-rupee is itself a currency — digital cash issued directly by the RBI — which means that settlement is instantaneous and final, with the RBI as the direct counterparty. A UPI transaction results in a change in bank balances; an e-rupee transaction transfers a direct RBI liability from one wallet to another, analogous to handing over a physical note. Business Standard
The RBI is testing interoperability between the e-rupee and UPI, which would allow users to transact with e₹ with “the same ease and convenience as UPI,” as Malhotra described it. The goal is to encourage broader adoption without requiring users to learn a new interface or infrastructure. World Bank
Cross-Border Use: On the Roadmap, Not Yet Deployed
The RBI’s 2024-25 Annual Report highlighted the bank’s intention to explore international functionalities for the digital rupee, with a strategic focus on cross-border transactions with other central banks. Linking the foreign exchange platform with Bharat Connect has been identified as part of this effort. Worldbank No bilateral CBDC payment arrangement with any foreign central bank — including those of BRICS member states — has been operationalised as of the date of this report.
The Pace of Transition
The e-rupee’s progress from a four-city, four-bank closed pilot in December 2022 to a 19-bank, 7 million-user programme with offline payments and live government use cases represents genuine operational progress. The RBI has been deliberate about its pace. Former Governor Shaktikanta Das had said there is “no rush” for a full-scale launch; the current approach accumulates operational knowledge — on user behaviour, system resilience, privacy design, and programmability outcomes — before committing to mass deployment.
The challenges that remain are well-documented: finalising data privacy safeguards and user consent mechanisms, resolving the tension between transaction traceability for anti-money-laundering compliance and the anonymity that cash currently provides, and establishing clear frameworks for cross-border use. The RBI has also maintained the e-rupee as non-interest-bearing by design, to prevent large-scale migration of deposits from banks into CBDC wallets, which could destabilise commercial bank funding.
For the ordinary Indian user, the e-rupee today is a sovereign-backed digital wallet that works like cash in an increasing number of settings — and, with the offline feature, in places where digital payments previously could not reach. Whether it becomes the mass-market instrument its designers envision depends on the resolution of constraints, including the bank account linkage requirement, that are acknowledged but not yet resolved.
