Central Bank Digital Currency (CBDC), Bank Deposits, and Digital Payments: First Evidence from a Live Retail CBDC

We provide the first evidence on how a live retail CBDC affects bank funding, lending, and payments, using India’s digital rupee rollout. The RBI’s staggered bank authorization and coordinated marketing campaigns show that CBDC eligibility lowers retail deposits by 2.7%, driven by liquid savings accounts; term deposits are unaffected. Credit declines briefly before recovering.

CBDC use displaces deposit-backed digital payments, not cash, and adoption is concentrated among wealthier, uninsured, and more educated depositors. A sufficient-statistics framework implies short-run welfare losses but long-run gains, as household convenience and safety benefits outweigh lost deposit franchise value, temporary credit contraction, and higher funding costs.