CBDC on Feature Phones: Will RBI's Digital Rupee Scale Beyond Smartphones?
Khushi V Rangdhol Sep 01, 2025 01:49
India's digital rupee (e₹) aims to reach feature-phone users, with offline capabilities being tested. Progress exists, but widespread adoption remains a challenge.
India wants its “cash-but-digital” rupee to work even when the internet doesn’t. That makes one question decisive: can the e₹ reach hundreds of millions of feature-phone users—not just app-first smartphone owners?
What the RBI has actually shipped
India’s retail CBDC (e₹-R) has been in pilot since December 1, 2022, with wallet apps from participating banks and interoperability to UPI QR codes. In January 2025, the RBI’s own FAQ confirmed that offline capability is being tested through multiple designs, including (a) solutions that work without internet but require telecom connectivity and (b) NFC-based proximity payments. The FAQ also lists 15 pilot banks offering wallets.
Through FY 2024–25, the pilot expanded to 17 banks with about 6 million retail users, and e-rupee in circulation reached ₹1,016 crore by March 31, 2025, according to the RBI Annual Report coverage in mainstream business press.
To widen access, the RBI has said it will open CBDC wallets to non-bank payment apps (e.g., PhonePe/Google Pay/Paytm) instead of limiting distribution to banks alone—an important pivot for scale.
One sobering datapoint: after banks stopped aggressive incentives (like partial salary credits in e₹), daily transactions fell sharply from a targeted 1 million to roughly 100,000–300,000, underscoring that organic demand is still being built.
Where “feature-phone CBDC” stands today
- NFC offline on Android is live with at least one bank: Axis Bank’s documentation states the offline feature works only on NFC-enabled Android devices, not on iPhones and not on non-NFC phones—so not yet on ordinary feature phones.
- RBI is testing multiple offline paths. The official FAQ mentions a telecom-dependent mode (think USSD/SIM-Toolkit-style flows) and an NFC mode, but does not yet declare a nationwide, feature-phone-ready rollout.
- Industry prototypes for feature phones exist. In Sept 2023, Airtel Payments Bank, Nokia (HMD Global) and IDEMIA announced a project specifically to enable offline CBDC payments on feature phones—a clear sign the ecosystem is targeting that gap, albeit pre-commercial.
- Fintech wallets are joining the pilot. In Jan 2025, CRED (beta) and MobiKwik (Android) integrated the digital rupee with YES Bank as sponsor, indicating broader distribution channels are forming—even if still smartphone-led.
Bottom line: there’s credible progress on offline, but true feature-phone ubiquity is not here yet.
Why feature phones matter
India still has hundreds of millions of feature-phone users, a population the RBI and NPCI have historically served via UPI 123PAY (IVR, missed-call and sound-based payments without data). That’s the benchmark for inclusion the e₹ must meet.
The RBI’s offline CBDC design targets the same inclusion goal: payments in low-connectivity areas and resilience during network outages—without defaulting to cash. Public remarks from the Governor through 2024–25 consistently emphasized bringing offline functionality to the retail pilot.
How other countries reached non-smartphone users
- Nigeria (eNaira) rolled out *USSD (997#) access for feature phones—no apps needed.
- Ghana (eCedi) piloted smart-card wallets and POS devices that support consecutive offline payments in low-connectivity towns.
These show two pragmatic blueprints India could adapt: USSD/SIM-Toolkit menus and low-cost hardware wallets/cards.
For India specifically, the BIS “Project Polaris” handbook flags feature phones and smart cards as viable offline CBDC endpoints—useful guardrails as the RBI refines architecture and risk controls.
The engineering and policy hurdles
- Endpoint diversity (and cost). Supporting SIM-Toolkit/USSD, NFC phones, and possibly smart-cards raises costs for banks and wallet providers. There’s no MDR on CBDC, so issuers must fund the stack another way. (RBI documentation confirms the “cash-like, zero-fee” approach.)
- Double-spend risk offline. Until devices sync, the system needs robust value ceilings and secure elements. India already has an offline-payments framework (non-CBDC) with ₹200 per transaction and ₹2,000 instrument limit—useful precedent for CBDC risk caps, though not yet formal CBDC policy.
- Competing with UPI. UPI (and 123PAY for feature phones) is everywhere. For e₹ to earn a place in the wallet—digital or physical—it must offer distinct value (e.g., programmable benefits, genuine offline cash-like use, or new merchant economics) rather than duplicating what UPI already does well.
- Demand without incentives. Reuters’ reporting on the post-incentive transaction slump suggests CBDC must anchor real use-cases (benefit payouts that are redeemable only for specific categories, just-in-time micro-subsidies, transit, campus cash, etc.) to stand on its own.
Will e₹ reach feature phones at scale?
Technically, yes—India has all the building blocks:
- USSD/SIM-Toolkit rails proven by UPI 123PAY,
- NFC offline already in limited production for CBDC, and
- Ecosystem prototypes (Airtel/Nokia/IDEMIA) aimed at feature phones.
Practically, the bar is higher. To justify the operational lift for banks and merchants—and to persuade users who already have UPI—the RBI will likely need to lean on use-cases that only CBDC does cleanly:
- Programmable transfers (DBT, allowances, purpose-locked funds),
- Guaranteed offline acceptance for small-value payments in blackout zones, and
- Faster settlement for government/aid disbursement with auditable trails. (Programmability pilots are already referenced by RBI.)
If those land—and if feature-phone endpoints become cheap, reliable, and ubiquitous—the digital rupee could become the first large-scale, offline-capable CBDC that truly rivals cash for everyday transactions across rural India.
Until then, the honest status is: promising prototypes and early NFC offline, with the feature-phone leap still ahead.
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