Introduction
India’s e ₹ (digital rupee) has made steady technological progress, but adoption remains modest compared with UPI.
The fundamental problem is simple: for most consumers, UPI already provides instant, convenient and widely accepted digital payments. e₹ therefore needs to offer benefits that UPI cannot.
The RBI’s approach increasingly appears to be about finding specific use cases rather than replacing UPI.
Retail e₹: The UPI Problem
For everyday transactions, consumers have little incentive to shift from UPI to a separate CBDC wallet. UPI works across banks and merchants, while e₹ requires users to maintain a digital-rupee wallet.
The RBI has attempted to reduce this friction by enabling e₹ wallets to make payments using UPI QR codes, expanding participation among banks and non-banks, and exploring offline payments.
However, greater interoperability also makes the distinction between the two systems less meaningful to consumers. UPI’s success is arguably the biggest challenge for retail e₹.
Wholesale e₹: A Stronger Proposition
The case for CBDC is more compelling in wholesale finance. Wholesale e₹ can facilitate settlement between financial institutions and potentially reduce settlement and counterparty risks.
Its bigger opportunity could be tokenised financial assets. As bonds and other securities become tokenised, CBDC could provide the central-bank-money settlement layer underneath these transactions.
This could make wholesale e₹ far more significant than its retail counterpart.
The Advantages
e₹ offers several potential benefits:
- Central-bank-backed digital money, programmable payments
- Offline functionality
- Faster settlement and support for tokenised assets.
It could also eventually contribute to cheaper and faster cross-border payments, particularly where CBDCs become interoperable across countries.
The Challenges
The biggest challenge is lack of a compelling consumer use case. There are also concerns around privacy, cybersecurity, operational resilience and the possibility of CBDC wallets competing with traditional bank deposits.
For financial institutions, integration costs and the need to build new infrastructure could also slow adoption.
What Is the RBI Planning?
The RBI is moving beyond basic digital payments and experimenting with programmable CBDC, offline transactions, government-benefit payments, wholesale settlement, tokenised securities and cross-border applications.
The direction suggests that the digital rupee is increasingly being positioned as financial infrastructure rather than simply another payment method.
What Comes Next?
Retail e₹ is likely to remain a complementary payment option rather than a UPI replacement. Its adoption may grow where programmability, offline capability or targeted government payments provide a genuine advantage.
The more interesting development could be wholesale e₹. If India’s financial markets increasingly adopt tokenised securities and other digital assets, the digital rupee could become the settlement layer connecting these assets with central-bank money.
The future of e₹ may therefore be less about getting every Indian to pay with a digital rupee, and more about making the digital rupee an invisible but important part of India’s next-generation financial infrastructure.
Lateral Thinking 
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