Opinion

Can the RBI’s e₹ Become India’s Next Financial Game Changer?

• ByStartupStory     |    July 30, 2026

The Reserve Bank of India’s (RBI) wholesale Central Bank Digital Currency (CBDC), or e₹, has largely been viewed as a faster settlement mechanism. But its true potential goes far beyond digitising money. If implemented through a centralized lending platform connecting banks and selected NBFCs, the wholesale e₹ could fundamentally transform India’s short-term money market by eliminating unnecessary intermediaries, improving liquidity distribution, and preventing misuse of funds. 

India’s banking system often faces an imbalance where some banks hold excess liquidity while others face temporary cash shortages. Today, these institutions largely rely on the interbank call money market or Ready Forward (RF) deals to borrow funds for periods ranging from overnight to a few weeks. Although the system is significantly safer than it was before the 1992 securities scam, the process still involves multiple entities, settlement layers, and infrastructure that increase cost and complexity.

Historically, brokers played a central role in matching lenders and borrowers. During the 1992 Harshad Mehta scam, this structure allowed brokers to temporarily hold settlement money before it reached the actual counterparty bank. That settlement “float” was diverted into the stock market, helping create an artificial bull run. The core weakness was simple—the transfer of money and securities did not happen simultaneously, creating a window where intermediaries controlled the cash. 

Since then, RBI has introduced reforms such as Delivery versus Payment (DvP), CCIL, electronic settlement systems and the ban on broker-intermediated RF deals. These reforms have made the system far more secure. However, short-term lending still passes through several settlement layers, clearing institutions and messaging systems before money finally reaches the borrowing bank. 

This is where the wholesale e₹ can become a true game changer.

Imagine a centralized RBI-operated digital marketplace where every scheduled bank and eligible NBFC can view institutions willing to lend surplus funds and those seeking short-term liquidity. Instead of routing transactions through multiple intermediaries, the lender and borrower would transact directly using tokenised wholesale e₹.

The settlement would be instantaneous and atomic—meaning the transfer of money and the transfer of the lending obligation happen simultaneously. No broker, clearing member or third party would ever hold the cash, eliminating settlement float entirely. 

Such a platform would also improve efficiency in liquidity management. A bank with excess liquidity in Mumbai could instantly lend to another bank or NBFC facing a temporary shortage anywhere in the country. Matching would occur on a single digital platform, reducing transaction costs and ensuring faster access to funds.

The benefits extend beyond efficiency. A centralized peer-to-peer wholesale lending portal would increase transparency in the money market. RBI would gain real-time visibility into borrowing patterns, liquidity movements and systemic risks, allowing quicker policy responses during periods of financial stress. Smart contracts could automatically calculate interest, enforce collateral requirements and return funds on maturity without manual intervention. 

Perhaps the biggest advantage is what the system prevents. Since funds move directly between regulated institutions using RBI-issued digital currency, there is virtually no opportunity for any intermediary to temporarily deploy those funds elsewhere. The possibility of diverting short-term interbank money into speculative activities, such as equity markets, is effectively removed because settlement itself becomes the transaction.

Interestingly, RBI has already begun moving in this direction through its Unified Markets Interface (UMI) initiative, which aims to tokenize financial market instruments and enable settlement using wholesale CBDC. The next logical step would be to broaden this platform into a unified liquidity marketplace where banks and carefully regulated NBFCs can borrow and lend directly using e₹. 

India successfully transformed retail payments through UPI by creating a common digital infrastructure. A similar approach for institutional money markets could be equally revolutionary. A centralized wholesale e₹ platform would not merely digitize existing transactions—it would redesign the way liquidity flows through the financial system.

The future of interbank lending may no longer depend on brokers or fragmented settlement systems. Instead, it could operate on a secure, transparent, peer-to-peer digital network where money moves instantly between institutions, strengthening financial stability while making India’s banking system more efficient than ever before.

Article researched and written by Mayank Sati

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