In India, the government is turning to welfare payments to drive adoption of its central bank digital currency (CBDC).
According to an April 23 report by Reuters, the Reserve Bank of India (RBI) is currently running pilot programs to route portions of the country’s roughly US$80 billion welfare system through the e-rupee in a bid to boost usage and improve welfare delivery.
The pilot, run jointly by the RBI, the World Bank, the Maharashtra government, and the Punjab National Bank, is one of approximately 10 experiments currently under way across India to test whether the e‑rupee system can be used to deliver welfare payments more efficiently, two people familiar with the initiatives told the media outlet.
e-rupee for subsidy payments
Indian authorities are prioritizing use cases in the farm and subsidized food distribution, sectors where welfare often struggles to make it to the right recipients, and where the CBDC can serve a clear purpose.
For agricultural subsidies, the CBDC system is particularly appealing because it eliminates the need for recipients to pay for the equipment upfront or wait weeks or months for a government refund. Instead, the government transfers the subsidy directly into the recipient’s digital wallet in e‑rupees, covering 80% of the total costs, as the pilot is currently structured. The funds are programmed to be spent at approved vendors.
“The programmable aspect of CBDC ensures funds cannot be misused while also removing the need for farmers to make an upfront payment,” said Vijay Kolekar, an economist at a Maharashtra government agency overseeing the project, quoted by Reuters.
The experiment is also testing whether the CBDC can enable a more “equitable and inclusive subsidy delivery system”, he said. Vendors, typically from socially dominant groups, are often reluctant to offer credit to farmers lower in the social hierarchy. By having the government pay vendors directly through e-rupee, the system ensures that marginalized farmers can use their subsidies without needing to rely on the goodwill of shopkeepers.
Meanwhile, in Prime Minister Narendra Modi’s home state of Gujarat, about 15,000 beneficiaries have already been enrolled in a pilot that uses the e-rupee to distribute subsidized food through government ration shops, said Mona Khandhar, a senior state official. The aim is to eventually cover all 7.5 million families eligible for subsidized food in Gujarat by June, she added.
The rise of CBDCs
India launched its e-rupee system in late 2022, pitching it as the future of payments. However, adoption has remained limited.
Transactions using the CBDC have totaled about US$3.6 billion since its inception. In comparison, the Unified Payments Interface (UPI), India’s widely popular real-time payment system, processes more than US$300 billion monthly.
Despite this slow uptake, the e-rupee remians the second-largest CBDC pilot in the world, behind only China’s digital yuan (e-CNY). According to the Atlantic Council, an American think tank in the field of international affairs, China’s e-CNY reached a total transaction volume of 7 trillion e-CNY (US$986 billion) in June 2024.
These efforts reflect a broader global trend. As of July 2025, there were 49 CBDC pilot projects worldwide, including active trials in Brazil, South Korea, and Hong Kong. Three countries, namely the Bahamas, Jamaica, and Nigeria, had launched their digital currencies.
Linking CBDCs
Beyond efforts to boost CBDC usage domestically, the RBI is also engaging with central banks from four to five nations, including partners across Asia and advanced European economies, to build cross-border transaction systems using CBDCs, sources familiar with the matter told Business Standard in March.
The proposed framework is expected to cover both wholesale and retail transactions, and aims to sharply cut remittance costs and streamline compliance requirements, making cross-border transactions faster and more efficient.
This initiative is particular relevant to India, which has consistently been the world’s top recipient of inward remittances. In 2024, India received nearly US$138 billion in remittances, according to the World Migration Report 2026 released by the International Organization for Migration. It is the only country in the world to have crossed the US$100-billion remittance mark, the report says, highlighting the economic contribution of its global diaspora of around 19 million people.
Featured image: Edited by Fintech News Singapore, based on images by superstarphoto and joy2023 via Magnific
