Countries and central banks across the world have been working towards developing an optimal framework for the issuance and operation of a central bank digital currency (CBDC) that meets the requirements of their individual economies. In October 2022, the RBI released a Concept Note on Central Bank Digital Currency discussing a broad framework for the launch of India’s first digital currency or eRupee. The RBI has outlined several policy guiding principles that it will adhere to when developing an ecosystem for the eRupee.

The eRupee has the potential to revolutionize cross-border payments (allowing for cheaper and faster transfers across borders). A CBDC based cross-border payment product could potentially solve for each of these risks allowing for real-time, cost-effective payments with zero settlement risk. This however requires integration with CBDC systems across multiple jurisdictions and will need some amount of co-ordination among central banks across the world. One of the most important use-cases of the eRupee will be the creation of a platform that can support innovation in financial products and payments. India is likely to be one of the first large economies to launch and operationalize a retail CBDC which places it in the unique position to be able to power the next generation of CBDC based product innovation.

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