India’s IndusInd Bank is conducting a programmable CBDC pilot with farmers

Indian private sector lender IndusInd Bank has collaborated with climate technology company Circularity Innovation Hub (CIH) to successfully implement the Reserve Bank of India’s (RBI) Programmable Digital Currency (CBDC) pilot program.

The pilot project will be implemented as an alternative form of CBDC, where the bank can program the end use of funds disbursed to farmers instead of generating carbon credits, IndusInd said in a statement.

In February, India’s central bank said it is looking to add programmability and offline capabilities to CBDC retail payments. While programmability is expected to facilitate transactions for specific and targeted purposes, offline functionality will enable transactions in areas with poor or limited internet connectivity.

A CBDC is a digital form of banknote issued by the country’s central bank. As many as 130 countries, representing 98% of global gross domestic product (GDP), are exploring a CBDC.

“Working with CIH and other stakeholders, we are excited to drive positive change in the agricultural sector and beyond. This partnership reflects our commitment to promoting both economic growth and environmental sustainability,” said Sumant Kathpalia, Managing Director and CEO, IndusInd Bank.

The bank has started programmable CBDC disbursement to 50 farmers in Ratnagiri district of Maharashtra and will cover around 1,000 farmers in the future. This is significant as it points to the adoption of innovative financial solutions for the Indian agricultural sector – the backbone of the Indian economy, which contributes over 16% to the country’s Gross Domestic Product (GDP).

IndusInd Bank’s project involves the lender creating digital wallets and managing CBDC transfers, along with partners including CIH, a sponsoring agency for this project. CIH builds circular economy business models around all waste, not only to recycle it, but also to reuse it as energy or by-product, generating circularity credits.

Hindustan Agro and Jackfruit King Company spearheaded farmer engagement by linking sustainable practices to additional revenue streams, while Emertech Innovations developed a blockchain-enabled platform to provide end-to-end traceability and transparency in monetizing circularity credits and its traceable disbursement. The collaboration aims to promote circularity credits from the recycling of agricultural waste.

“This initiative with the RBI shows the transformative potential of combining technology with sustainability. We are excited about the future, especially our plans to extend these benefits to waste processors and more farmers,” said Gaurav Somwanshi, co-founder and CEO of Emertech Innovations.

IndusInd Bank, CIH and partners want to scale up the pilot into a national initiative for the benefit of farmers. The second phase of the project will target Safai Karmacharis (cleaning workers), with the aim of increasing their income by utilizing the revenue generated from the collection, recycling and repurposing of plastic waste.

IndusInd Bank, with a customer base of about 39 million, posted a net profit of 8,977 crores ($1.07 million) Indian rupees for the year ended March 31, 2024 – a growth of 21% over the previous year – helped by healthy loan growth.

To find out more about Central bank digital currency and some design decisions to consider when creating and launching it, read nChain’s CBDC playbook.

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