The Indian digital rupee, or e, is slowly transcending its initial use case of digital payments as policymakers are now contemplating its role in tokenised financial markets, welfare delivery and cross-border payments.
The Reserve Bank of India (RBI) began its wholesale CBDC pilot in November 2022, followed by a retail digital rupee pilot in December 2022. Since the inception of its pilot, the central bank has been experimenting with several features – programmability, offline transactions and interoperability with the Unified Payments Interface (UPI). As of March 16, 2026, the retail CBDC pilot has seen the onboarding of approximately 1 crore users and 19 banks.
Digital Rupee Plays New Role in Tokenised Assets
Perhaps the most exciting thing the Indian CBDC ecosystem could look forward to is the settlement of tokenised financial assets.
One step of this conversion to digital is tokenisation. Digitalising an asset such as a corporate bond, it can be stored and transferred via the existing digital infrastructure. But it is not only the transfer of the asset that requires settlement, the payment related to that transaction has to be settled too.
That’s where the wholesale digital rupee might come into play.
India has already experienced a tokenised corporate bond transaction where the tokenised security and digital rupee were traded together. A similar setup – called as simultaneous/atomic settlement – can also lower settlement risk by moving the asset leg and the payment leg together.
The key in recent efforts is to establish wholesale CBDCs as a distinct category in India’s financial-market system, rather than add retail as a broad, catchall category.
Programmable Digital Rupee for Government Benefits
More immediately applicable is the area of programmable money.
CBDC can have conditions built into it, which is not possible in standard digital money. CBDC is currently being experimented with for DBT (Direct Benefit Transfer) programmes in which funds are allocated for a specific purpose.
In August 2026, the government initiated a food subsidy transfer using CBDC at Pradhan Mantri Garib Kalyan Anna Yojana in Chandigarh and Dadra & Nagar Haveli. As part of this model, the Government directly transfers the subsidy amount to the Digital Rupee wallet of beneficiaries. The amount is targeted and can be used for buying foodgrains from the merchants who are on the emarket list.
The model not only offers instant transfers, increased traceability and less reliance on cash handling, but also shows how CBDC could be used for targeted social payments, rather than copying traditional bank transfers.
The initial pilots for the CBDC-based food subsidy model, has been tested in Gujarat and Puducherry before being scaled to the UTs.
Cross-Border Payments Could Be Another Growth Area
The RBI is also exploring the benefits of CBDC in cross border transactions.
The government added that the Reserve Bank of India is also engaging with the central banks of the UAE and Singapore. It has further been part of some of the Multilateral Initiatives, like Project Rialto, Project Aperta, and the second phase of Project Mandala.
Cross-border payments using the digital dollar could potentially cut down on the number of middlemen needed for international payments, speed up settlements and enhance visibility into the status of payments.
The RBI also indicated it intends to pilot bilateral and multilateral cross border CBDC pilots in 2026-2027 and test use cases such as international remittance and other financial applications.
Digital Rupee vs UPI: Different Roles Emerging
The digital rupee may not always replace UPI.
UPI is India’s predominant retail digital payment infrastructure and CBDC can complement features that a traditional payment infrastructure does not provide in this manner, such as programmability, tokenised-asset settlement, and settlement using central-bank-money.
The government responded in March 2026 that the digital rupee is already compatible with UPI, and testing for offline payments and decimal payments is underway.
This implies that over time India’s digital payments ecosystem may expand into a multi-layered one with UPI enabling the everyday ones and those of CBDC taking shape in niche areas like finance and government schemes.
What Lies Ahead for India’s Digital Rupee?
Hence, the future of India’s CBDC may be less to introduce yet another payment instrument and more to establishing a digital settlement architecture for the entire financial system.
These are various ways the digital rupee could be used, such as tokenised bonds, decentralised welfare payments, wholesale settlements and cross-border transactions.
In more uses We’ll have to wait until this occurs – and when it does, it will be driven by factors such as the availability of infrastructure, the user experience, and interoperability, cybersecurity and regulation. By powering not only speed but also fragility.
In India, the trajectory of the digital rupee could ultimately come down to the RBI and other regulators striking the right balance between innovation and financial stability. If the pilots lead to scalable use cases, a CBDC could play a critical role as an additional element of India’s digital financial architecture – going far beyond just payments.
