If you’re from India, then you already know how UPI has shaped digital transactions for individuals and even small shop owners. UPI has been a huge success in India and has put the country years ahead of developed nations in terms of digital transactions.
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According to NCPI figures, in 2022, Indian users conducted Rs 126 Lakh Crore worth of transactions using UPI. The graph below shows the monthly usage of UPI:
Keeping in mind the success of UPI and the growing interest in cryptocurrency, which is not stable and poses a high financial risk, the Government of India has announced the launch of the Digital Rupee – a Central Bank Digital Currency that will be issued and controlled by the Central Bank (RBI).
What is Digital Rupee or eRupee in simple words?
The Digital Rupee, or e-Rupee (e₹), is a Central Bank Digital Currency (CBDC) – a digital version of a country’s fiat currency (an electronic form of sovereign currency).
In simple words – The Digital Rupee is just like regular currency but in digital form. It has value as it represents a claim on the Reserve Bank’s balance sheet. The Reserve Bank of India is the one issuing it, and it’s considered legal tender.
So, How eRupee work?
At present, the e-Rupee is in pilot mode and only people who are invited will be able to use the Digital Rupee Wallet app. In the pilot phase, the Digital Wallet app is only provided by SBI, IDFC, ICICI, and YES Banks.
To use the Digital Rupee Wallet app, user can connect their bank account to this digital wallet and load the amount to use the Digital money for sending and receiving payments.
e-Rupee can be used for both retail and wholesale transactions and can be accessed by individuals, businesses, and financial institutions. They are based on distributed ledger technology, which allows for more transparency and security in the monetary system.
How is the eRupee different from UPI?
e-Rupee is itself a currency in a digital form that enables digital transactions whereas UPI is just a platform for digital transactions. The clear difference, right?
How is the eRupee different from NEFT/RTGS/IMPS?
Digital Rupee or e-Rupee is not only a payment medium but also a digital currency while NEFT, RTGS, IMPS and UPI are different modes of transferring money.
What are the Advantages of eRupee?
- Safety: The good thing about the digital rupee is that it has all the perks of regular cash, like being trustworthy, safe and settlement finality.
- Easier and cheaper Cross-border transaction: It will make cross-border transactions smoother and would reduce charges of sending and receiving currency
- Reduced illegal activities: with a digital currency, all transactions are recorded on a public ledger and it’s easy for the central bank to track them, this makes it harder for people to cheat or fraud. And when the central bank can keep an eye on the transactions, it can stop illegal activities from happening.
- Reduced cost of Physical Cash: It can reduce the cost of managing physical cash, and make it easier for people to access and use money.
- And another bonus, it’s not like those private digital currencies that don’t have any real value and can be risky, CBDC ensures consumer protection.
What are the disadvantages?
- No more secret transactions: You won’t be able to make transactions anonymously anymore because all transactions are recorded on a public ledger and can be tracked by the central bank.
- Bye-bye physical cash: There’s no option of holding physical cash with CBDCs, which gives central banks more control over interest rates and could lead to people losing their money.
- Central bank’s new tool: CBDCs give central banks new tools to control the economy which could be bad for the economy and lead to policies such as expiry, helicopter money and lending decisions.
- Personalized monetary policy: CBDCs provide the central bank with a lot of data on individual spending, saving and investing habits, which could lead to a personalized monetary policy that affects some people more than others.
It will be hard for the Digital Rupee or eRupee to gain widespread acceptance among customers, as UPI is already being widely used and accepted. People will not want to install multiple digital wallets for the same purpose when UPI can easily handle all their transactions.
This will only change if eRupee offers strong and practical benefits that make it a must-have for everyday use. Stay tuned for more interesting Facts!
Don’t miss out on the FAQs, get the answers to the most asked questions or say interesting facts about eRupee or Digital Rupee (CBDC) now.
