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UPI-CBDC Interoperability: Advancing Retail Digital Rupee Adoption


From UPSC perspective, the following things are important :

Prelims level: CBDI, UPI

Mains level: Read the attached story


Central Idea

  • The convergence of Unified Payments Interface (UPI) Quick Response (QR) codes with Central Bank Digital Currency (CBDC) applications is set to revolutionize digital transactions in India.
  • This strategic integration enables users of the retail digital rupee to seamlessly transact using UPI QR codes, making transactions convenient for both customers and merchants.

Understanding Interoperability

  • Interoperability refers to the technical compatibility that allows different payment systems to function together.
  • It empowers various payment systems to process transactions across platforms, contributing to efficiency, innovation, and adoption for end-users.

UPI QR Code-CBDC Interoperability: Explained

The Reserve Bank of India (RBI) is driving this interoperability between UPI and CBDC as part of its ongoing pilot project for the retail digital rupee (e₹-R).

  • Initially, e₹-R users required a specific QR code for transactions.
  • With UPI-CBDC interoperability, any UPI QR code becomes compatible with CBDC apps.
  • The digital rupee, issued by RBI, is a tokenized digital version of the rupee stored in a digital wallet linked to a savings bank account.
  • UPI, directly linked to a user’s account, can now transact seamlessly with CBDC.

Benefits for Customers and Merchants

The convergence of UPI and CBDC yields several advantages:

  • Customers can use a single QR code for various transactions, eliminating the need for multiple platforms.
  • Daily essentials like groceries and medicines can be purchased using any UPI QR code.
  • Merchants can accept CBDC payments without creating separate QR codes.
  • Transactions are streamlined and efficient, enhancing the user experience.

Enhancing CBDC Adoption

The UPI-CBDC interoperability leverages the widespread use of UPI to boost digital rupee adoption.

  • More than 70 mobile apps and 50 million merchants already accept UPI payments.
  • Integrating UPI with CBDC simplifies transactions, increasing the digital rupee’s utility.
  • Prominent banks like State Bank of India, HDFC Bank, and Axis Bank have introduced UPI interoperability on their digital rupee platforms.
  • This seamless integration is expected to transform the digital currency landscape, driving its acceptance and utilization.


  • The UPI-CBDC interoperability marks a significant milestone in India’s digital payment ecosystem.
  • By merging the familiarity of UPI with the innovation of CBDC, the retail digital rupee becomes more accessible, user-friendly, and efficient.
  • This strategic integration is poised to accelerate the adoption of digital currencies, reshaping the way transactions are conducted in the country.

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