Page 26 - Banking Finance November 2025

ARTICLE

Programmable CBDCs, including possible social and eco- speed up the settlement process in many fields, from manu-
nomic gains. The idea of better fiscal policy transfer is espe- facturing to e-commerce. This higher level of trust and
cially appealing to the governments. India's social programs, speed could open up new business models and encourage
which depend on Direct Benefit Transfers (DBT), could be new ideas, especially in areas that are ready to be auto-
run in a way that is both more efficient and clearer than mated. Various organisations are already testing program-
ever before. Because the digital rupee can be programmed, mable allowances for things like newspaper allowances,
it would be possible to precisely target recipients and make which shows how this technology can be used in real life in
sure that funds are used for their intended goals as we have company finance.
seen in the above cases. This would greatly reduce fraud,
waste and administrative costs. The interest subsidy dis- To-date Developments
bursement mechanism in Pradhan Mantri Vidyalaxmi (PM India's path to CBDC has been planned out and done in
Vidyalaxmi) scheme is a noteworthy live use-case.
stages. The RBI has successfully tested its wholesale CBDC
(eRs) for interbank payments, with the goal of making the
Here, as per the announced mechanism; the interest sub- government securities market more efficient and cutting
sidy amount will be credited directly to a student's CBDC costs. The retail CBDC (eRs) is still under testing pilot stage
wallet which can be redeemed against payment to their with current use base around 60 Lakhs around 17 banks.
education loan account or for direct payment to college or
These pilots are very important for getting information, fig-
university. This makes sure that the subsidy does exactly
uring out how it will affect the financial system and improv-
what it's supposed to do, which is to lower the cost of study
ing the plan for design and delivery. Notably, non-bank pay-
& using safety valve to prevent possible subsidy leakage. The ment system providers have also been given permission to
same type of subsidy disbursement mechanism can be imple-
offer e-wallets. This is done to take advantage of India's high
mented into the farm credits (3% Prompt Repayment In- rate of mobile payments to improve reach in the last mile.
terest Subsidy), LPG subsidy etc. as well where it can be auto
programmed to release of subsidy directly to beneficiary's UPI has made real-time payments more accessible to ev-
CBDC wallet once he repaid the loan amount to lender bank.
eryone, but the CBDC adds extra layers of security by hav-
ing a central bank backing it, final settlement and most
Meaning to Private Sector importantly, the ability to be programmed. This makes it
What this means for India's huge private industry is also very possible for "purpose-based" transactions that UPI isn't natu-
important. Programmable CBDCs could make complicated rally built for. India's dedication to interoperability and build-
business deals easier, especially in India's complicated sup- ing on past wins rather than replacing them is shown by the
ply lines. Smart contracts could make payments automatic fact that UPI QR codes can also be scanned to make e-pay-
if things are delivered, services are completed, or terms of ments.
the contract are met. This would cut down on disputes and
Programmable CBDCs can be used for a number of differ-
ent reasons. Some of these goals are to make payment sys-
tems more efficient, help underserved groups become more
financially included by making digital payment options more
available, encourage new ideas in financial services and
protect monetary sovereignty in a world that is becoming
more digital. Programmable CBDCs could give the RBI more
precise control over how monetary policy is carried out. This
would allow for tailored stimulus measures or better imple-
mentation of interest rate changes, for example, to directly
address inflation in certain sectors.

The case of cross-border CBDC pilots, both on a bilateral and
a multilateral level, as a way to solve problems with speed,
efficiency and openness in foreign transactions. This is es-

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