Global: Indian Banks Incentivize Central Bank Digital Currency Transactions

In a bid to boost the usage of the Reserve Bank of India’s central bank digital currency, known as the e-rupee, Indian banks are introducing incentives for transactions, sources revealed.

These incentives encompass a variety of offers, from cash-back rewards to points-based systems similar to those available for credit and debit card usage. The sources requested anonymity as they were not authorized to speak to the media, and the Reserve Bank of India (RBI) did not provide any official comment.

The RBI initiated a pilot program for the e-rupee in December with the goal of reaching a daily transaction volume of one million by the end of the year. However, current retail transaction numbers fall significantly below the target, averaging around 25,000 daily, prompting the RBI to push for increased adoption.

To attract users, the central bank has also introduced new features, such as linking the digital currency with India’s widely used real-time payments system, the Unified Payment Interface (UPI), according to a previous Reuters report.

HDFC Bank, India’s largest private lender, has introduced these offers to expand digital currency transactions. Parag Rao, the bank’s Country Head for Payments, Liability Products, Consumer Finance, and Marketing, did not specify the details of these offers.

Smaller private banks like Yes Bank and IDFC First Bank are offering reward points that can be redeemed for travel bookings, mobile recharges, and cashbacks through FastTag, a highway toll collection system, as stated by one of the sources.

Other banks, including ICICI Bank and Union Bank, are expected to launch similar incentives, as reported by two executives at these banks.

A spokesperson for Yes Bank described these incentives as “time-bound promotional incentives” that align with the bank’s digital strategy.

The banks are funding these offers themselves, according to the three sources.

Globally, countries like Nigeria have offered various rewards, such as discounts on auto-rickshaw rides, to encourage the adoption of their digital currencies, although with limited success.

The incentives are seen as short-term measures, driving transaction volumes temporarily, according to a senior banker at a private lender. Banks may not continue offering such incentives for an extended period unless a clear business proposition emerges.