Usage of India's digital currency, the e-rupee, has slumped to just a tenth of the peak hit in December, four sources said, reflecting the struggles several countries have experienced in trying to generate public support for digital currencies.

The Reserve Bank of India started a pilot for the e-rupee, devised as a digital alternative to physical cash, in December 2022, and successfully reached a target of 1 million retail transactions per day by December 2023.

The achievement came only after banks were asked to push up transactions by offering incentives to retail users and disbursing a portion of bank employees' salaries using the e-rupee.

But now that the push has diminished, daily transaction numbers have fallen to about 100,000, said two of the sources, who are directly involved in the pilot.

This shows there is little organic demand to use the e-rupee, said a third source, a banker involved in the project.

The sources declined to be identified because they are not allowed to speak to media. The RBI did not respond to an email seeking comment and the data on retail transactions via the e-rupee is not publicly disclosed.

The transactions that are continuing are in part due to banks disbursing benefits to their employees via the e-rupee, all four of the sources said.

This has helped to push up transactions to about 250,000 to 300,000 per day towards the end of each month, the two sources cited earlier said.

The RBI had asked banks to boost transactions to at least 1 million per day by late 2023 because it wanted to "test the system's resilience at scale," but that push has now stopped, the second of the two sources said.

The RBI is not planning to rapidly expand the pilot and the current focus is on testing the technology and developing use cases for the digital currency, the source said.

"Adoption should grow as more use cases develop," the source added.

Globally, among 86 central banks surveyed by the Bank of International Settlements, a third are running a pilot for a central bank digital currency (CBDC).

Even those that have been launched, like in the Caribbean by the Bahamas and Jamaica, have had only limited success, the Federal Reserve Bank of Kansas City said in a April note.

"We have observed that to spur adoption, consumers may need more than just (retail) CBDC technology. They may need the (retail) CBDC to add value relative to cash." (Reporting by Jaspreet Kalra; Editing by Jamie Freed)