The Centre yesterday rolled out a central bank digital currency (CBDC)-based pilot for transfer of benefits under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).
Under the initiative, digital coupons will be credited into the CBDC wallets of beneficiaries. This programmable digital currency can then be only used to redeem the entitled quantity of foodgrains at fair price shops or merchant outlets.
The project is currently only being piloted in Puducherry to a limited number of users, with plans to expand the service across the UT. The Centre plans to expand the initiative to three to four states and union territories (UTs), including Chandigarh and Dadra and Nagar Haveli, “soon”.
The government said that it will take a call on further rollout of the project based on the outcome of the pilot.
“The system will address challenges related to biometric authentication and e-POS (point of sale) operational issues while ensuring secure, traceable and real-time transactions,” the government said in an official statement.
The statement also noted that special provisions have been made for feature phone users in the project, adding that the system also enables beneficiaries to locate nearby authorised merchants through the application.
The pilot is being implemented by the Puducherry government, the RBI, the Public Financial Management System (PFMS) and Canara Bank.
The initiative was launched by Union consumer affairs minister Pralhad Joshi in Puducherry yesterday. Addressing the gathering, Joshi said that 20 Lakh calls are being made to beneficiaries every month using artificial intelligence (AI) to gather feedback about the quantity and the quality of food grains.
Digital rupee, or e₹, is simply a tokenised digital version of the Indian fiat currency and is issued by the RBI as a CBDC. It offers features similar to physical cash like convenience of use, guarantee of RBI, finality of settlement, among others. This e₹ is stored in the user’s digital wallet and can be used to receive and send money as well as make payment for transactions, just like any physical Rupee note.
The wholesale CBDC pilot began in November 2022, while the retail pilot, intended for the public, was launched in December 2022. As of November 2025, retail pilot had expanded nationwide, covering 82 Lakh users and 11 Lakh merchants. So far, 19 banks are currently offering CBDC wallets, including SBI, ICICI Bank, IDFC First Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank, among others.
Besides select direct benefit transfer schemes, RBI is currently testing offline CBDCs to enable transactions without internet connectivity. The central bank is also pursuing bilateral and multilateral CBDC engagements to address challenges of cost, speed, and transparency for cross-border transactions.
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