What’s the New e-Rupee Programmability?

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  • 16 Feb 2024
What’s the New e-Rupee Programmability?

Kotak Insights | Date 16/02/2024

Imagine if India had its own digital money, just like the coins and notes we use, but you can't touch it because it's all online.

Well, that's what the Reserve Bank of India (RBI) did by creating the e-Rupee around a year back.

We also wrote about it here – E-Rupee: India’s Digital Currency Explained.

The e-Rupee is like digital cash that the RBI makes sure is safe to use. It is designed to help more people use money online, even if they don't have a bank account. And it can bring about a change in India’s digitisation.

Let us have a look at what makes it special and the RBI’s recent move.

The Birth of the e-Rupee

The e-Rupee is a special kind of digital money called a CBDC, which stands for Central Bank Digital Currency.

It is the RBI's digital version of our everyday rupees. You can use it easily with mobile phones or computers, and since the RBI backs it, it's safe.

About a year ago, the RBI introduced the e-Rupee as a pilot run, in smaller groups, to test the waters and to see how businesses and people are adopting to the concept.

The Centre discussed the idea of having CBDC as a counter to the growing popularity of cryptocurrencies, which as per the RBI as well as the government, has the potential to be used for criminal activities. And after researching the feasibility, the central bank launched the abovementioned pilot programme for the e-Rupee which commenced in December 2022.

The rolled out e-Rupee has unique characteristics: it is a legal tender and is designed for easy accessibility, ensuring that anyone with a mobile device can use it, even without a bank account. It is available in both wholesale and retail formats, thereby catering to a wide range of transactions, from interbank settlements to consumer purchases.

It is also different from cryptocurrencies in that it has a centralised ownership i.e. the RBI. And unlike UPI, the e-rupee isn’t a digital payment interface, rather it in itself is cash.

So, how did this pilot perform? Well, it was a success as the RBI met its target of 1 million daily e-rupee transactions by the end of 2023.

So far, so good.

Let us now go over a recent development and the subject of interest – its programmability.

The Advent of Programmability

After the pilot run, the RBI now wants to take the e-Rupee to the next level.

And this next step is the programmability of e-Rupee.

Last week, RBI Governor Shaktikanta Das said that the RBI has introduced programmability and offline functionality in its CBDC (retail) pilot. He further added that programmability will enable users, like government agencies, to ensure payments are made for defined benefits.

What’s that, you ask?

You see, one of the coolest things about the e-Rupee is that it can be programmed.

Programmability in the context of the e-Rupee refers to the ability to embed smart contracts into transactions, enabling the digital currency to execute predefined actions under certain conditions.

This means the RBI can set rules for how the e-rupee is used, allocated and controlled.

For example, it could make a special kind of e-Rupee that you can only spend on food or education. Or say, corporates will be able to programme specified expenditures, like business travel, for employees with this feature.

Apart from this, features like validity periods or geographical areas within which the CBDC may be used can also be programmed.

This helps make sure money is used where it is needed.

This level of control and flexibility is a first-time for traditional currencies and it could revolutionize how policies and financial interventions are implemented.

Moreover, the programmable features of the e-Rupee could enhance transparency and efficiency in financial transactions. By automating payments and ensuring they are executed only when certain criteria are met, the e-Rupee can reduce the risk of fraud, eliminate intermediaries, and streamline the process of financial compliance.

With programmable E-Rupee, the RBI can do more to help the economy. Instead of using monetary policy measures to adjust interest rates to change the economic tone, it can send money directly to people or businesses and make sure it's spent in desired ways.

It could be a way for the RBI to manage the country's money and make sure it's doing the best.

However, the advent of programmability also brings challenges with it.

Challenges and Considerations

Even though the e-Rupee has a lot of benefits, there are some challenges too.

  • Privacy and Surveillance Concerns: The ability to program and track digital currency transactions raises privacy issues. Programmability could enable surveillance, allowing authorities to monitor spending patterns in real-time.
  • Security Risks: The introduction of smart contracts and programmable functions could increase the attack surface for potential cyber threats.
  • Digital Literacy and Accessibility: While the e-Rupee aims to enhance financial inclusion, its success is contingent on widespread digital literacy and access to technology. Bridging the digital divide is crucial to ensure that the benefits of programmable money reach all segments of the population, especially in rural and underserved areas.
  • Regulatory and Ethical Implications: Programmable money poses regulatory challenges, including the ethical considerations of restricting how and where money can be spent.
  • Fungibility Concerns: Some experts worry this might impact the fungibility of the e-Rupee—its ability to be interchangeable with other units of the same value—if certain units are programmed with restrictions that others do not have.

The RBI is working on these issues to make sure the e-Rupee works well for everyone.

Despite these challenges, the potential benefits of the e-Rupee—enhanced efficiency, financial inclusion, and the ability to conduct targeted economic interventions—present a compelling case for its development.

Moreover, the lessons learned in this process will not only shape the future of the e-Rupee but also contribute to the global discourse on the role of digital currencies in modern economies.


The e-Rupee is a big step forward for India, making money easier and safer to use for everyone. It's like having digital cash that you can use with your phone.

As we learn more and solve any problems, the e-Rupee could change how we think about and use money every day.

For those interested in delving deeper into the intersection of technology and finance, exploring CBDCs and their potential impact on international monetary systems presents a fascinating next step.

In all, the journey of the e-Rupee is just one chapter in the broader narrative of digital currencies' role in shaping the future of global finance. It is an exciting time for India's money, and there's a lot more to learn and explore!

To know how you can track and invest in Digital India’s Growth Engine, click here to explore the IT Powerhouses stock basket.

We’ll be back with another exciting story next week!

Until next time,

Happy learning!

Sources: Kotak Securities, RBI, Economic Times, Moneycontrol

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.

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