10-18-2025 
|
Getting your Trinity Audio player ready...
|
The Reserve Bank of India (RBI) has announced plans to tokenize financial assets and settlements through its wholesale central bank digital currency (CBDC). The decision is based on promising initial outcomes from pilot programs involving the issuance of Certificates of Deposit (CDs), which have shown potential to improve market efficiency. A CD is a fixed-income financial instrument regulated by the RBI.
- RBI reboots the finance sector
- Banking on wholesale CBDC innovation
- Mapping India’s digital future
- Leveraging AI for financial inclusion
“Asset tokenization offers new possibilities for Indian financial markets in expanding access, improving transparency, and enhancing settlement efficiency through smart contracts,” RBI Governor Sanjay Malhotra said at the Global Fintech Fest 2025.
“The Reserve Bank has conceptualised the Unified Markets Interface (UMI), as a next-generation financial market infrastructure. UMI will have the capability to tokenize financial assets and settlements using wholesale CBDC. Early results from the inaugural pilot on the issuance of Certificate of Deposit, in improving market efficiency are encouraging,” Malhotra stated in his speech.
Asset tokenization converts real-world assets (RWAs) into digital tokens on a blockchain, allowing fractional ownership and supporting global trade. This method broadens market access, enhances transparency, and streamlines settlements through smart contracts.
In February this year, the RBI announced that card tokenization has seen widespread adoption, with over 910 million card-on-file tokens created by December 31, 2024. Introduced to enhance security, tokenization replaces actual card details with a unique code (or ‘token’), thereby reducing the risk of data fraud during transactions.
At the same time, India’s growing adoption of blockchain and distributed ledger technology has paved the way for tokenized bank deposits, or digital versions of traditional deposits secured on blockchain. In August last year, RBI Deputy Governor Michael Debabrata Patra pointed out that these deposits could be used in domestic and cross-border payments, trading, settlements, and as cash collateral. Their programmability also allows seamless use in smart contracts, enabling instant settlement by combining payment data and value.
Wholesale CBDC base for asset tokenization
The RBI’s wholesale CBDC, also known as e₹-W, is the foundation for the asset tokenization pilot because it is specifically designed for banks and financial institutions to settle money between each other. Under this, the RBI acts as the central trusted authority, facilitating all transactions.
“India’s Central Bank Digital Currency (CBDC), the Digital Rupee (e₹), represents a critical new rail in the DPI [Digital Public Infrastructure] architecture,” Malhotra said in his speech.
Since its introduction in December 2022, the retail e₹ pilot currently has 19 banks and seven million users, allowing person-to-person (P2P) as well as person-to-merchant (P2M) transactions, the governor informed. Interoperability with India’s Unified Payments Interface, an example of successful DPI, is also enabling wider adoption of the e₹ without compromising user convenience.
Moreover, the programmability features of the CBDC have allowed innovative approaches to purpose-driven direct benefit transfers, subsidies, and targeted lending. Several provincial governments have utilized these features, demonstrating their potential to enhance the efficiency of subsidy delivery and direct benefit transfers (DBT), Malhotra informed.
For instance, G-SAFAL or Gujarat scheme for Antyodaya Families for Augmenting Livelihoods scheme employs programmable CBDC to deliver livelihood assistance. Beneficiaries are permitted to spend subsidies exclusively on approved agricultural inputs within a designated geographic area. Likewise, in southern India, the Andhra Pradesh DEEPAM 2.0 scheme distributes liquefied petroleum gas (LPG) subsidies through programmable CBDC, which beneficiaries redeem upon receipt of gas cylinders from registered agencies.
Next phase of digital journey
The next phase of India’s digital journey includes aggregation and leveraging financial data, the digital rupee, asset tokenization, artificial intelligence (AI), and tackling digital fraud.
“The first phase of India’s digital journey was about building the foundation and expanding access to financial services such as savings, insurance, investments. The next phase is about universalising and deepening impact by using data responsibly…Some work has been done in all these areas, but more needs to be done,” Malhotra informed in his speech.“We need to develop DPI for data integration across various data sources to widen and deepen financial inclusion. The Account Aggregator (AA) framework is one such endeavour. It is empowering individuals to share their financial data safely with regulated entities,” Malhotra stated.
This framework allows customers to securely and digitally share their financial data between different financial institutions with their consent. According to the governor, this ecosystem has seen notable progress with 17 AAs, 650 Financial Information Users (FIUs), 150 Financial Information Providers (FIPs), 160 million accounts being served, and 3.66 billion data requests from FIUs processed by AAs. Many important government-owned data sources have also been included in the AA framework.
“The RBI is in the process of introducing standards designed to improve customer onboarding processes, enhance user interfaces, strengthen data security, and increase transparency in consent management and data sharing under the AA framework,” Malhotra informed.
“While there is huge potential for the AA framework to grow, its success will depend on two critical aspects, namely, integration with more financial information, especially information which is vital for assessing the financial status of an individual, and interoperability across account aggregators,” he pointed out.
The Unified Lending Interface (ULI) is another step in RBI’s data aggregation and is expected to transform credit delivery completely in the country. Since its introduction in August 2023 and until October 3, 2025, the ULI pilot has expanded to 120 data sources or services, 58 lenders, including banks, non-banking financial corporations (NBFCs), and co-operative banks, with 3.2 million loans sanctioned and ₹1.75 trillion ($2.11 billion) in lending.
“Credit remains the lifeblood of inclusive growth. Despite best efforts by the government, RBI, and the banking system, and huge progress made in this regard, a vast credit gap still persists. The ULI seeks to bridge the gap by enabling efficient, data-driven, and inclusive credit delivery,” Malhotra stated.
The ULI is also facilitating the use of data by lenders to develop alternative credit assessment models, which in turn allows extension of credit to individuals without prior credit history or those new to the credit system.
AI for effective DPI
The governor said AI has the potential to significantly advance the next generation of DPI in two key ways. First, integrating AI within the existing DPI ecosystem can improve user experience and operational efficiency. For instance, features like conversational payments can make digital transactions more accessible to individuals with limited digital literacy, helping integrate more people into the formal financial system. Second, AI itself can be developed as a form of public infrastructure.
Moreover, the RBI’s FREE-AI committee report also emphasized the need to create foundational public resources to support AI in the financial sector. These include establishing a standardized financial data infrastructure, ensuring access to computing capabilities, and developing locally relevant AI models tailored to the specific requirements of India’s financial sector.
In February, India’s Economic Survey 2024–25 pointed out that the rapid adoption of AI, blockchain, and data analytics transforms traditional financial services. AI and large language models (LLMs) are improving customer interactions through chatbots and personalized services. Blockchain, on the other hand, ensures secure and transparent transactions.
The survey also noted that changing consumer expectations, driven by digital-savvy users, are pushing both legacy firms and startups to innovate and offer more user-friendly financial solutions.
“We stand at an important juncture in our digital finance journey. The past decade has demonstrated how technology can expand access and empower businesses. The next phase must build on this strong foundation, while keeping trust and stability at its central theme,” Malhotra concluded.
Watch: India posed to become leaders in Web3
Recommended for you
