RBI e₹ (Digital Rupee) – The need for Offline Feature for India’s own CBDC similar to UPILite

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 RBI e₹ (Digital Rupee) – The need for Offline Feature for India’s own CBDC similar to UPILite

          As per the concept paper in public domain, e₹ (Digital Rupee) can be transacted in offline mode too.

          Online mode means wherein the whole process requires net connectivity.

          Offline mode means wherein the whole process may not require net connectivity.



          A complete online process may not be beneficial to the public at large.

          The exact approach to the Offline e₹ (Digital Rupee) will be known in due course.

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At the same time, the use of offline feature in CBDC would also be beneficial in remote locations and offer availability and resilience benefits when electrical power or mobile network is not available.

Unquote

          A Bank Account in physical cash mode, can have three phases i.e Deposit, Withdrawal and Payment

Deposit Phase – Deposit via physical Cash or digital mode into the bank account

Withdrawal Phase – Withdraw physical cash for personal use or payment or digital transfer to own bank account with another financial institution.  Here, withdrawal means the usage of the available balances for own purpose.

Payment Phase – Payment to third party bank account via digital mode / Cheque

In a physical cash transaction, once the physical cash changes hands, the settlement finality is reached.

However, this is not the case in offline digital transactions. The settlement finality is reached only when the transaction is recorded in the central database.

A bank account in e₹ (Digital Rupee)mode, may have only two phases i.e Deposit and Payment. Withdrawal is not envisaged under e₹ (Digital Rupee) mode, as physical cash cannot be withdrawn or transferred to another e₹ (Digital Rupee) account.

Major Assumption under ER

Each Income Tax PAN can have only One e₹ (Digital Rupee) Account, by whatever name called, in whatever mode.

This means it may not be possible for Income Tax PANs to have multiple e₹ (Digital Rupee) accounts, like bank accounts now.

The Income Tax PAN can be substituted by any other unique identifier as finalised in the final e₹ (Digital Rupee) rollout.

Q: What is the necessity for offline feature in CBDC?

Ans: There are two primary reasons for the Offline feature in CBDC.

Reason 1) Account holders should have access to their monies at all times. Numerous instances of NETWORK DOWN scenarios will reduce retail participation in India’s ER. Retail folks, may find it more convenient with the present process, rather then new processes.

Reason 2) The hops in the payment process should be low for high success rate. One of the ways to reduce the hops is to explore a hybrid offline n online mode.

          One of the best examples of the hybrid mode is UPILITE

Additional Reading:

TAKING DIGITAL CURRENCIES OFFLINE dt.SEPTEMBER 2022 @ https://www.imf.org/en/Publications/fandd/issues/2022/09/kiff-taking-digital-currencies-offline

 

ProgressSoft: Offline Use in Central Bank Digital Currencies - Between a Rock and a Hard Place - Posted on Aug 23, 2022 @ https://cbpn.currencyresearch.com/blog/2022/08/23/between-a-rock-and-a-hard-place-offline-use-in-central-bank-digital-currencies

Disclaimer: These are my personal views only. The bottom line is Safe ePayments. Nothing More – Nothing Less.

I am solely responsible for error, if any.

Copyrights if any, belong to the original copyright holder only.

 

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