RBI to explore CBDC pilot in cross-border transactions

The Reserve Bank of India announced plans to expand the digital rupee (e₹) retail pilot to additional direct benefit transfer (DBT) schemes and a wider domes...

What Happened

The Reserve Bank of India announced plans to expand the digital rupee (e₹) retail pilot to additional direct benefit transfer (DBT) schemes and a wider domestic retail footprint in 2026-27.
The RBI is actively exploring cross-border CBDC pilots, having signed a memorandum of understanding on digital asset collaboration with the Monetary Authority of Singapore (MAS); bilateral discussions with MAS and the Central Bank of the UAE are underway for operationalising cross-border CBDC use cases.
India joined Phase 2 of the BIS Innovation Hub-led Project Mandala and Project Rialto — multilateral initiatives developing technical standards and protocols for CBDC-based cross-border payments.
The expansion comes even as retail CBDC in circulation fell 24.08% in FY26, with the RBI explicitly identifying captive, high-impact institutional use cases (DBT, cross-border) as the strategic priority over broad retail adoption.
The RBI's Unified Markets Interface (UMI) wholesale CBDC platform launched a pilot for tokenised certificates of deposit, signalling the evolution of e₹-W from a settlement instrument to an asset tokenisation infrastructure.

Static Topic Bridges

RBI's CBDC Architecture — e₹-R and e₹-W

India's Central Bank Digital Currency programme operates through two distinct instruments: the Retail CBDC (e₹-R) for general public and business payments, and the Wholesale CBDC (e₹-W) for interbank and financial market settlement. Both were launched as pilots in late 2022 following RBI's October 2022 Concept Note. The legal framework was established through Finance Act 2022 amendments to the RBI Act, 1934 — specifically amending Section 22 to extend the RBI's note-issuance power to digital form.

e₹-W pilot: commenced 1 November 2022; use cases include government securities transactions and interbank call money market; e₹-W is auto-redeemed end-of-day, resulting in zero net circulation.
e₹-R pilot: commenced 1 December 2022; available through 15 participating banks; distributed via digital wallets (not bank accounts); users can make P2P and P2M payments.
e₹ is a direct liability of RBI, not a bank deposit — offering zero credit risk and full legal tender status under Section 26 of the RBI Act, 1934.
Unlike UPI (which settles through bank accounts), e₹ is itself a form of money — akin to holding digital cash.
RBI's Concept Note identifies financial inclusion, cross-border payment efficiency, and monetary policy transmission as the three primary policy rationales for CBDC.

Connection to this news: The RBI's decision to expand e₹-R into DBT schemes and cross-border payments reflects a lessons-learned recalibration from FY26's circulation decline — captive, high-volume institutional use cases are more tractable entry points than voluntary retail adoption.

Direct Benefit Transfer (DBT) and Programmable CBDC

Direct Benefit Transfer (DBT) is a central government initiative launched in January 2013 that routes subsidies and welfare payments directly into beneficiaries' bank accounts, eliminating intermediaries. The DBT Mission operates under the Cabinet Secretariat and coordinates across over 300 schemes spanning 53 ministries. Programmable CBDC adds a policy-enforcement layer to DBT that conventional bank transfers cannot provide.

DBT Mission established: 1 January 2013; revised and relaunched in 2014 to expand scope.
DBT covers LPG subsidies, MGNREGS wages, scholarships, pension, PDS food subsidies, fertiliser subsidies, and healthcare benefits, among others.
Total DBT transfers exceed ₹34 lakh crore since inception (cumulative to FY25); estimated savings from eliminating ghost beneficiaries exceed ₹3.48 lakh crore.
Programmable e₹ can restrict use to specific goods/services, geographic areas, time windows, and vendors — addressing the "fungibility problem" in cash-based DBT where cash is diverted to non-intended uses.
The FY26 pilot in Gujarat, Puducherry, and Chandigarh tested programmable e₹ for PDS grain subsidies; success metrics include reduced PDS diversion and faster reconciliation.

Connection to this news: Expanding programmable CBDC across more DBT schemes in 2026-27 would move e₹ from a pilot curiosity to a policy instrument at scale — potentially the most significant application of CBDC in any major economy if India's DBT programme adopts it systematically.

Cross-Border Payments — Architecture and CBDC's Role

Cross-border payments — international transfers of money between individuals, businesses, and governments — are a critical component of global financial infrastructure. Traditional cross-border payments rely on correspondent banking networks (the SWIFT system), which are slow (2-5 days), expensive (average global cost: ~6% of transaction value), and opaque. The G20 under India's 2023 Presidency designated cross-border payment improvement as a top priority of the Financial Stability Board (FSB) and BIS roadmap.

Correspondent banking: banks in different countries maintain "nostro/vostro" accounts with each other or with intermediary banks; each hop adds cost, time, and opacity.
CBDC-based cross-border architecture bypasses correspondent banks: central banks exchange CBDC directly via bilateral or multilateral platforms, achieving atomic settlement.
Project Rialto (BIS Innovation Hub): modular FX component for cross-border retail payments using tokenised central bank money; RBI participates.
Project Mandala (Phase 2): encodes country-specific regulatory compliance (capital controls, KYC/AML requirements) into a shared cross-border protocol; reduces compliance friction for legitimate transfers.
India's existing bilateral payment linkages include UPI-PayNow (Singapore), UPI-PromptPay (Thailand), RuPay-Discover (international card acceptance); CBDC cross-border pilots represent the next generation.

Connection to this news: India's bilateral MoUs with Singapore (MAS) and UAE (CBUAE) for cross-border CBDC pilots are strategically significant — both are major remittance corridors. India receives the world's largest inward remittances (~$120 billion in FY25); a CBDC corridor even marginally reducing remittance costs would translate to large absolute savings for Indian households.

Monetary Authority of Singapore (MAS) and India-Singapore Financial Cooperation

The Monetary Authority of Singapore (MAS) is Singapore's integrated financial regulator and central bank — a peer institution to the RBI in the Indo-Pacific financial architecture. India-Singapore financial cooperation spans banking regulation, securities market linkages, payment systems, and now CBDC collaboration.

MAS regulates all financial institutions in Singapore under the MAS Act; it also conducts monetary policy through exchange rate management (not interest rate), setting the Singapore dollar's nominal effective exchange rate (NEER) band.
The RBI-MAS UPI-PayNow linkage (launched February 2023) was the world's first bilateral real-time payment system linkage between two countries; CBDC MoU builds on this cooperation.
MAS is a key participant in multiple BIS Innovation Hub experiments (Project Ubin+, Project Dunbar); India's engagement with MAS for CBDC aligns with MAS's established technical expertise.
Central Bank of the UAE (CBUAE) — RBI's other bilateral CBDC interlocutor — governs the UAE dirham; UAE is India's second-largest remittance corridor after the US.

Connection to this news: Bilateral CBDC pilots with both MAS and CBUAE — India's two largest CBDC-active partners in remittance corridors — suggests the RBI is pursuing a strategically targeted approach rather than building a universal system, consistent with India's payment diplomacy strategy.

Key Facts & Data

Retail CBDC (e₹-R) circulation end-FY26: ₹771.66 crore (24.08% decline YoY from ₹1,016.46 crore).
e₹-R pilot launch: 1 December 2022; e₹-W pilot: 1 November 2022.
Legal basis: Finance Act 2022 amendments to RBI Act 1934, Section 22.
RBI Concept Note on CBDC: 7 October 2022.
DBT Mission established: 1 January 2013 (Cabinet Secretariat).
Total DBT transfers (cumulative to FY25): over ₹34 lakh crore; savings: over ₹3.48 lakh crore.
FY26 programmable e₹ DBT pilots: Gujarat, Puducherry, Chandigarh (PDS grain subsidies).
MoU with MAS (Monetary Authority of Singapore): signed FY26 on digital asset collaboration.
BIS projects joined: Project Rialto; Phase 2 of Project Mandala.
UPI-PayNow (India-Singapore) bilateral link: launched February 2023 — world's first bilateral RTPS linkage.
India inward remittances FY25: approximately $120 billion (world's largest recipient).
e₹ participating banks in retail pilot: 15.