Retail central bank digital currency in circulation falls by 24% in FY26

The value of retail Central Bank Digital Currency (CBDC) in circulation fell by 24.08% during FY 2025-26, dropping from ₹1,016.46 crore to ₹771.66 crore by e...

What Happened

The value of retail Central Bank Digital Currency (CBDC) in circulation fell by 24.08% during FY 2025-26, dropping from ₹1,016.46 crore to ₹771.66 crore by end-March 2026.
Despite the circulation decline, the Reserve Bank of India expanded pilot use cases, including direct benefit transfer (DBT) delivery to public distribution system (PDS) beneficiaries in Gujarat, Puducherry, and Chandigarh using programmable CBDC.
The RBI developed the Unified Markets Interface (UMI), a multi-layer platform for tokenisation of financial assets that leverages wholesale CBDC for settlement; a pilot for issuance and trading of certificates of deposit in tokenised form has commenced on UMI.
On the international front, the RBI signed a memorandum of understanding on digital asset collaboration with the Monetary Authority of Singapore (MAS) and held bilateral discussions with MAS and the Central Bank of the UAE for cross-border CBDC pilots.
India joined BIS Innovation Hub-led multilateral initiatives — Project Rialto and Phase 2 of Project Mandala — both focused on improving cross-border payments through CBDC infrastructure.
Wholesale CBDC (e₹-W) recorded zero circulation throughout FY26, reflecting the end-of-day auto-redemption practice by financial institutions that use it only for intraday settlement.

Static Topic Bridges

Central Bank Digital Currency (CBDC) — Concept and Legal Framework

A Central Bank Digital Currency (CBDC) is a digital form of sovereign legal tender issued and backed directly by the central bank. Unlike commercial bank deposits, a CBDC is a direct liability of the central bank — placing it at par with physical currency in terms of safety and legal status. India's digital rupee (e₹) derives its legal basis from amendments to the Reserve Bank of India Act, 1934 made through the Finance Act, 2022, which amended the definition of "bank note" to include banknotes in digital form under Section 22 of the RBI Act.

RBI published its Concept Note on CBDC on 7 October 2022, outlining the design, architecture, and policy rationale for India's digital rupee.
Two variants: e₹-Retail (e₹-R) for general public P2P and P2M transactions; e₹-Wholesale (e₹-W) for interbank and government securities settlement among regulated financial institutions.
The e₹-W pilot commenced on 1 November 2022 with select banks (SBI, HDFC Bank, ICICI Bank, Union Bank of India among the initial participants).
The e₹-R pilot for retail users commenced on 1 December 2022.
Legal status under Section 26 of the RBI Act: digital rupee carries the same legal tender status as physical currency.

Connection to this news: The 24% decline in retail CBDC circulation in FY26 suggests that user adoption of e₹-R for everyday transactions remains limited despite the expanded pilot. The RBI's pivot towards programmable DBT use cases and cross-border pilots represents a strategic recalibration — seeking high-impact, captive use cases rather than waiting for organic retail adoption.

Programmable CBDC and Direct Benefit Transfers

Programmability is a defining feature of CBDCs that distinguishes them from physical cash. A programmable CBDC can be embedded with conditions governing when, where, and for what purpose the funds can be used — enabling automated policy compliance and reducing leakage in welfare transfers. The RBI's pilot of programmable CBDC for PDS subsidy delivery represents a direct application of this feature.

Programmable CBDC links fund transfer to specific end-use conditions (e.g., funds usable only for food grain purchase at designated PDS shops), reducing diversion.
The DBT pilot in Gujarat, Puducherry, and Chandigarh targets welfare beneficiaries — a population with limited access to conventional digital payment infrastructure.
Programmability can also enable time-bound expiry of funds (e.g., ration subsidy valid for a month), automatic reconciliation, and real-time monitoring by the nodal ministry.
The Unified Payments Interface (UPI) has demonstrated India's digital payments infrastructure depth, but CBDC with programmability adds a policy layer that UPI cannot provide for conditional grants.

Connection to this news: Using programmable CBDC for PDS delivery is the RBI's most substantive FY26 use case — it addresses genuine inefficiencies in the ₹2 lakh crore annual DBT ecosystem and could become the primary argument for broader CBDC adoption if pilots show measurable leakage reduction.

Asset Tokenisation and Wholesale CBDC

Asset tokenisation refers to the conversion of rights in a real-world asset (bonds, deposits, real estate, commodities) into digital tokens on a distributed ledger or blockchain. The RBI's Unified Markets Interface (UMI) platform extends wholesale CBDC beyond mere interbank settlement into tokenised financial markets — enabling atomic (simultaneous) delivery-versus-payment for tokenised assets.

The UMI platform enables tokenisation of financial assets while using wholesale e₹-W for settlement, eliminating settlement risk by ensuring payment and asset transfer occur simultaneously.
The first UMI pilot covers certificates of deposit (CDs) in tokenised form — CDs are short-term money market instruments issued by banks to raise funds from the market.
Tokenisation of government securities, corporate bonds, and other financial instruments could reduce settlement cycles from T+1 to near-instantaneous, lowering systemic risk.
BIS Innovation Hub's Project Rialto explores tokenised cross-border FX settlement using wholesale CBDC; Project Mandala explores encoding jurisdiction-specific regulatory requirements into cross-border payment protocols.
India's participation in Phase 2 of Project Mandala is relevant to RBI's compliance monitoring of cross-border capital flows, a sensitive policy area.

Connection to this news: The e₹-W's zero retail circulation paradox — it's technically active but never "circulates" because of intraday use — reflects the wholesale CBDC's different design logic: it functions as a settlement rail, not a circulating instrument.

Cross-Border Payments and CBDC Interoperability

Cross-border payment systems are traditionally slow (2-5 days), expensive (average 6% fee globally), and opaque. The G20 under India's 2023 Presidency identified cross-border payment enhancement as a priority. CBDC-based cross-border systems offer a potential solution by enabling direct central-bank-to-central-bank settlement without correspondent bank intermediation.

RBI signed an MoU with the Monetary Authority of Singapore (MAS) on digital asset collaboration; bilateral discussions with MAS and Central Bank of UAE are ongoing for CBDC cross-border pilots.
Project Rialto (BIS Innovation Hub): focuses on improving instant cross-border retail payments using a modular FX component with tokenised central bank money settlement.
Project Mandala (Phase 2): encodes jurisdiction-specific policy and regulatory requirements into a common cross-border protocol; India's participation extends its capability for monitoring compliance in cross-border transactions.
India already has a bilateral RuPay-UPI linkage with several countries (Singapore, UAE, France, Mauritius); CBDC cross-border pilots represent the next layer of this payment diplomacy.

Connection to this news: The RBI's bilateral and multilateral CBDC initiatives with Singapore, UAE, and via BIS projects position India as an active architect of the emerging CBDC interoperability standards — a strategically important posture as global central banks move towards CBDC deployment.

Key Facts & Data

Retail CBDC (e₹-R) in circulation, end-March 2026: ₹771.66 crore (down from ₹1,016.46 crore).
FY26 decline in retail CBDC circulation: 24.08%.
Wholesale CBDC (e₹-W) circulation in FY26: zero (intraday use only, auto-redeemed end-of-day).
e₹-W pilot launch: 1 November 2022; e₹-R pilot launch: 1 December 2022.
Legal basis: Finance Act 2022 amended RBI Act 1934 (Section 22 definition of "bank note").
RBI Concept Note on CBDC: published 7 October 2022.
Programmable DBT pilot states/UTs: Gujarat, Puducherry, Chandigarh.
International MoU: RBI-MAS (Monetary Authority of Singapore) on digital asset collaboration.
BIS projects joined: Project Rialto; Phase 2 of Project Mandala.
Number of banks in e₹-R pilot: 15 (as of latest data).