Why a digital currency e-Rupee (e₹-R) is the next big thing in India?
After a number of countries have announced plans to launch their own central bank-backed digital currencies, the Reserve Bank of India has pulled off a major feat in bringing the concept and technology together with e-Rupee.
It launched a pilot project on its digital currency or e-Rupee on Thursday, December 1. The project will first be carried out in a handful of banks like ICICI, HDFC, State Bank of India (SBI), and others in four cities—Mumbai, New Delhi, Bengaluru, and Bhubaneswar.
But how can ordinary people benefit from e-rupee? In fact, what purpose does it serve when the unified payment interface (UPI) has become such a popular system in recent years? Other questions that remain in our heads are –
- How does the central bank-backed digital currency work?
- Can it be used on a regular QR where UPI works?
- What value will it add over UPI?
- What benefits over cash?
Just like BHIM UPI, the government is likely to launch an app for the digital rupee. As of now, those banks that are a part of a pilot project will create a wallet for the digital rupee and individuals can access it through banks’ apps. But soon we will have an app like BHIM UPI for e-rupee and individuals can use it.
“The customers of these banks can now avail e-rupee through the banks’ app. But very soon the government will surely launch an app like BHIM-UPI for e-rupee and individuals can use it,” said Rachit Chawla, CEO of Finway FSC, a digital lending platform.
The major difference between UPI and e-rupee wallet is that e-rupee wallet does not require any bank accounts to be linked with. However, in order to carry out transactions through UPI, customers must link their wallets with bank accounts.
How is it beneficial to us?
- Cash is bulky. You can carry only limited cash in your pocket, You can carry only limited cash in your pocket, it would be bulky beyond say 2000-2500 Rupees. Digital currency is easier because it’s digital.
- Digital Rupee is more secure than cash because if you lose your phone or misplace your wallet, you can re-install it and recover the money.
- Digital currency is more anonymous than current traditional digital transactions. Why? Because once you debit the account and move money to a digital wallet, then all subsequent transactions are from “wallet to wallet”. individual transactions will not touch the Core Banking System and will not reflect in your bank account statement, unlike say UPI. Just like how physical cash movement from your pocket to another person today does not show in your bank account statement.
- The owner of the digital currency can transact with another person, even in offline mode, and as when they get to the network, synchronisation can be done.
- Counterfeiting is a big issue today. with CBDC will be impossible because every currency will have an address and verifiable.
While this will certainly push the boundaries of how we view payment and currency today, it is just the beginning of a bigger picture that could be created by the union of mobile phones, digital banking, and mobile wallets. There is no doubt that we need something like a digital Rupee backed by the Reserve Bank – but e-Rupee is certainly far from perfect. It will certainly need a lot of work and attention before we can see it adopted in a meaningful way. Furthermore, e-Rupee just isn’t enough to disrupt the existing models of digital payment. There’s still a lot of work to be done here.