For quite some time, the digital currency has been a worldwide phenomenon. It has received widespread acclaim and acceptance. In the market, digital currency is mostly known for two reasons: 

  1. To place a manual/traditional business operation or intention, such as supply chain management, environmental degradation, or international trade, on a secure and independent network system. 
  2. To use those secure currencies with respect to their scarcity and invest money with a hope of value appreciation. 

Surprisingly, India was not enthusiastic about these new ways of technology, particularly taxation, and levied high tax rates on income generated by such digital currency. Last year, the Indian government proposed the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which “seeks to prohibit all private cryptocurrencies in India, but it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.” 

Before and after the Digital Currency Bill, there were rumors that India was developing its own digital currency. The existence of a government-regulated digital currency that performed nearly all of the functions of a private digital currency was frequently reported in the media. The time has come for India to issue its own digital currency, known as the e-RUPI. Let’s take a deep dive into the subject to get you ‘e-RUPI Ready.’ 

What is Central Bank Digital Currency (CBDC)?

The central bank issues digital currencies similar to cryptocurrency. They are determined by the value of the country’s fiat currency. CBDCs are being developed and implemented in a number of countries. CBDCs’ primary goal is to provide privacy, transferability, convenience, accessibility, and financial security to businesses and consumers. 

India, in a press release dated October 7, 2022, the RBI announced the launch of a pilot programme for a digital rupee (eRs) for specific purposes, thus joining the club of digital currencies. On November 1, 2022, the first pilot in the digital rupee wholesale segment (eRs-W) will begin. This pilot is intended to settle secondary market transactions in government securities. Furthermore, the use of eRs-W is expected to improve the interbank market’s efficiency. In addition, nine banks have been identified for participation in the pilot, including SBI and HDFC Bank. 

What is an E-Rupi?

A digital version of a traditional, sovereign-backed currency notes to spend or receive this money, known as e-RUPI, you will not need a bank account. The RBI’s e-RUPI, which will be issued as tokens, will be equivalent to cash. It can be exchanged for physical bank notes as well as used to make payments.  

Interesting Facts Relating E-Rupi! 

  • Already, 105 countries are developing or researching the viability of this type of money for their economies. 
  • The RBI has been researching the concept of CBDCs since 2017. 
  • There are two types of CBDCs:  
  1. Retail CBDC
  2. Wholesale CBDC

and the currently E-rupee aims at functioning as a wholesale CBDC 

E-Rupi Solving Problems:

  1. e-RUPI will mitigate the bottlenecks of third-party banking functions like banking system glitches, technology failures, and process channel delays. 
  2. It will eliminate unnecessary steps in the banking system, reducing cross-border transactions since transactions will be conducted directly with government bodies. 
  3. In comparison to the popular dollar, it will entail a significant position hold in the international market. 

E-Rupi Creating Problems:

  1. The most serious issue that it may cause is its impact on the financial and economic markets. For example, the RBI’s flow of e-RUPI. 
  2. Monetary policy is used by the RBI to influence inflation, interest rates, lending, and spending, and much more. It must ensure that it does not eventually replicate fiat currency and that it stabilizes the digital effects that it should reasonably have. 
  3. To monitor for financial crimes, the RBI would need a high level of intrusion from various authorities; more departments, units, and laws would also be needed. 
  4. A central bank-issued digital currency will almost certainly draw a lot of attention, so security breaches will be a major concern. 

Two Cents on E-rupi

The e-RUPI appears to be a long-overdue factor.  

  • When it comes to fiat money, e-RUPI would lower the risks associated with using digital currencies in their current form.  
  • Cryptocurrencies are extremely volatile, with their value fluctuating all the time. This volatility may cause severe financial stress in many households and have an impact on an economy’s overall stability.  

The e-RUPI, which is backed by the government and controlled by a central bank, would provide a stable means of exchanging digital currency for households, consumers, and businesses. 

Frequently Asked Questions

1. Is e-RUPI India’s own cryptocurrency? 

e-RUPI is not a cryptocurrency, despite the fact that the concept of central bank digital currencies is inspired by cryptocurrencies and blockchain technology. CBDCs are governed by a central bank, whereas cryptocurrencies are almost always decentralized, which means they cannot be governed by a single authority. 

2. How can I get the e-RUPI? 

Although the RBI will be the sole regulator and issuer of the e-RUPI, it will be easily accessible to the public via trusted payment/fintech apps. It is possible that a special wallet, similar to an Aadhaar Card, will be implemented. 

3. Is there any difference between e-RUPI and UPI Service? 

It is anticipated that e-RUPI will be distinct from UPI services. Many experts are skeptical of its retail application. A regular user currently has little incentive to switch to an e-RUPI with UPI. It is hoped that e-RUPI will try to outperform UPI benefits, but this appears unlikely at the moment. 

4. Will e-RUPI finally accomplish the dream of Digital India and replace Fiat money? 

Maybe! in the future it will.  The RBI will be directly liable for the e-RUPI. For small-value transactions, India still heavily relies on cash. However, there is a growing preference for the digital medium.