The Reserve Bank of India has notably expanded access to its Digital Rupee (Central Bank Digital Currency or CBDC) initiative by launching a Digital Rupee retail sandbox open to fintech startups. This marks a significant shift from the earlier pilot phase restricted to select banks, now enabling fintechs to leverage RBI-approved APIs within a controlled environment to build and test innovative products centered on the digital rupee (e₹).
“The CBDC retail sandbox will give innovators the space to experiment and build on top of the digital ruppee,” said RBI Governor Sanjay Malhotra at the Global Fintech Fest 2025. “It will help create new use cases, improve customer experience, and add value to ongoing pilots.”
The RBI also announced work on a Unified Markets Interface (UMI) to enable tokenisation of financial assets and smart contract–based settlements — marking a major leap in India’s AI and digital finance infrastructure.
What is Digital Rupee (CBDC)?
It is India’s official central bank digital currency issued by the RBI, representing a digital form of sovereign currency backed 1:1 by the government. Unlike traditional deposit money held in bank accounts (liabilities of commercial banks), the CBDC is a liability of the central bank itself, designed to be equivalent to physical cash in circulation but existing purely in digital form.
Key distinctions include:
- Legal tender issued by the central bank as opposed to money deposited in commercial banks.
- Supports instant peer-to-peer transfer and programmable money features.
- Enables enhanced transparency, traceability, and security in transactions.
- Can be used offline, especially useful for underbanked regions.
- Offers improved cost efficiency for currency issuance and management.
Unlike bank money, the digital rupee doesn’t require go-betweens like commercial banks for settlement, reducing risks like bank runs and mitigating operational complexities.
The New Digital-Rupee Retail Sandbox
RBI’s program now invites fintech startups to join this newly minted retail sandbox, allowing them to safely experiment with APIs to create wallets, payment gateways, and new financial toolkits that leverage the digital rupee. Participating entities—whether directly or via partner banks—can pilot solutions that integrate digital currency into real-world commerce with reduced regulatory and operational risks.
Governor Sanjay Malhotra highlighted that the sandbox aims to foster innovation and the development of novel use cases for digital currency, accelerating the evolution of India’s financial infrastructure.
Rahil of Unified Markets Interface (UMI)
Alongside the sandbox launch, Reserve Bank also revealed plans for the Unified Markets Interface (UMI), a platform to support tokenisation of financial assets and smart contract-based settlements. This initiative signifies a move toward deeper digital transformation, enabling efficient asset digitisation, programmable finance, and AI-powered financial services within regulatory frameworks.
Potential Impact on Indian Financial System
The broader inclusion of fintechs is poised to:
- Democratize access to CBDC tools, catalyzing competition and consumer-centric innovation.
- Boost payment efficiency, reducing transaction costs and settlement times.
- Drive the growth of programmable money applications like automated lending, insurance claims, and micro-payments.
- Enhance financial inclusion by integrating unbanked and underbanked populations through offline and low-cost digital currency use.
- Strengthen India’s position as a global leader in central bank digital currency adoption and fintech innovation.
Given India’s rapidly evolving digital payments ecosystem, this move can reshape how citizens and businesses interact with money, making digital currency as ubiquitous and versatile as the rupee notes in their wallets today.
Summary:
RBI’s opening of the Digital Rupee retail sandbox to fintech startups ushers in a new phase of innovation and inclusion in India’s payment landscape. With the promise of easily accessible APIs and emerging platforms like UMI, India is set to pioneer AI-driven programmable finance underpinned by its sovereign digital currency, empowering a smarter, more efficient, and inclusive financial ecosystem.
