Joining the bandwagon, State Bank of India (SBI) and Bank of Baroda have announced the introduction of a Unified Payments Interface (UPI) interoperability feature on its Digital Rupee application as a part of the Reserve Bank of India's (RBI's) Central Bank Digital Currency (CBDC) pilot project. With this, digital rupee app users can now scan any QR code at merchants to make payments for groceries and daily expenses.

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This launch came days after Kotak Mahindra Bank and Yes Bank went live with UPI Interoperability on the RBI's Central Bank Digital Currency (CBDC) app. Axis Bank also revealed the inclusion of UPI interoperability on its CBDC app named 'Axis Mobile Digital Rupee' last week.

Last month, the country's largest private lender, HDFC Bank launched a similar UPI QR code interoperable with India’s digital rupee becoming the first commercial bank to complete the integration process in India. Canara Bank also launched the 'Canara Digital Rupee' mobile app in August.

The launch of CBDC and usage

The RBI launched the Central Bank Digital Currency (CBDC) pilot programme in 2022. The Central Bank Digital Currency, also known as Digital Rupee, represents a tokenised digital version of the Indian Rupee. It is issued and regulated by the RBI.

This initiative introduced a digital currency system built on a unique QR code mechanism for conducting transactions. By integrating CBDC with UPI QR codes, the digital rupee gains a broader platform, with the goal of becoming a staple in daily transactions.

Actions have been taken by all participating banks in the Digital Rupee pilot to activate the interoperability between CBDC and the Unified Payments Interface (UPI). Via this, customers can scan a single QR code to pay through the CBDC wallet or UPI.

QR code interoperability

Interoperability is a crucial factor for the success of the digital currency of India – the Digital Rupee. UPI is one of the most widely used payment methods in India. An interoperable QR code enables a basic QR payment acceptance terminal to support the Scan & Pay feature from various factors and payment options, according to HDFC Bank.

How can customers use the feature?

QR Code interoperability paves the way for transactions between customers and merchants. It allows merchants to have one QR displayed for accepting payments from UPI or from the digital wallet.

Merchants are not required to replace the current QR codes. They only need to display a single QR code on their storefront or via the banking mobile application. The existing QR code will be interoperable, allowing a simple QR payment acceptance terminal. It will accommodate the Scan & Pay feature through multiple payment options.

Moreover, the eligible banks' digital rupee customers can transact using the funds available in their Digital Rupee (CBDC) wallet by scanning the UPI QR code.

First Published:Aug 30, 2023 1:53 PM IST