Relevance: GS III (Indian Economy – Digital Payments) & GS II (IR – Global Groupings) | Source: The Hindu / Reuters

1. Context: A New Financial Grid

  • The Reserve Bank of India (RBI) has proposed linking the Central Bank Digital Currencies (CBDCs) of BRICS nations. It has recommended including this agenda in the upcoming 2026 BRICS Summit, which India is scheduled to host.

2. The Proposal: Bypassing Borders

  • The Goal: To create a mechanism where the digital currencies of member nations (like India’s e-Rupee, China’s e-CNY, Russia’s Digital Ruble) can “talk” to each other.
  • The Benefit: This enables direct cross-border settlements without relying on third-party intermediaries (like US banks) or the SWIFT network.1 It makes trade faster, cheaper, and immune to unilateral sanctions.
  • Current Status: All five core BRICS members are running pilot projects.2 India’s e-Rupee (launched Dec 2022) currently has ~7 million users.3

3. Geopolitics: The “De-Dollarization” Debate

  • The US Angle: The initiative is viewed globally as a move toward “De-dollarization” (reducing reliance on the US Dollar).4 This risks friction with the US, which has threatened tariffs on nations attempting to bypass the dollar.5
  • India’s Balancing Act: The RBI clarifies that its primary aim is the internationalization of the Rupee to save transaction costs, rather than an explicit anti-dollar stance.

4. Concept Clarity: CBDC vs. UPI

Many confuse the two. Here is the difference:

  • UPI (Unified Payments Interface): It is a platform that moves “Bank Money” (money lying in your savings account).6 It is a liability of the commercial bank.
  • CBDC (e-Rupee): It is “Central Bank Money” in digital code. It is a direct liability of the RBI (sovereign guarantee). It is just like cash, but digital.

UPSC Value Box

Concept / Term

Relevance for Prelims

CBDC (e-Rupee)Defined as Legal Tender issued by the Central Bank in digital form. It is exchangeable 1:1 with fiat currency. It is not a cryptocurrency (which is decentralized).
Project mBridgeA real-world example of this concept. It is a multi-CBDC platform developed by the BIS (Bank for International Settlements) involving China, UAE, and Thailand for real-time cross-border payments.
SWIFTSociety for Worldwide Interbank Financial Telecommunication. A messaging network used by banks globally to send information about financial transactions.

Q. With reference to Central Bank Digital Currencies (CBDC) and digital payments in India, consider the following statements:

  1. The “e-Rupee” is a digital form of legal tender issued by the Reserve Bank of India.7
  2. Unlike the Unified Payments Interface (UPI), which facilitates the transfer of bank deposits, the CBDC is a direct liability of the Central Bank.8
  3. “Project mBridge” is a global initiative led by the World Bank to link digital currencies of G20 nations.9

Which of the statements given above is/are correct?

(a) 1 only

(b) 1 and 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

Correct Answer: (b)

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