The Reserve Bank of India (RBI) introduced a new digital currency called the E-Rupee on December 1, 2022. The Reserve Bank of India (RBI) has announced the introduction of the much-anticipated Central Bank Digital Currency (CBDC), a kind of official cryptocurrency. The State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank will be engaged in the regulated introduction of digital currency in these four locations.
The pilot’s scope might extend to cover more banks, users, and locations as required. The basic aim behind the establishment of the digital rupee is to eliminate cash from the market.
Also read: Using UPI Without Internet in 2022
What is the digital E-rupee?
E-Rupee is a digital replica of a central bank’s currency notes, a kind of digital money that may be used in contactless transactions. The central bank digital currency (CBDC), often known as the digital rupee, is legal tender in digital form. It will be convertible into existing currencies, accepted as payment, and considered a safe store of wealth. A digital rupee is the digital equivalent of a central bank’s currency notes. It is a kind of currency that may be used in contactless transactions.
Can we use digital e-rupees to make purchases and online payments?
Retail digital rupee transactions may be completed on mobile phones and other devices using a digital wallet. Only digital wallets provided by banks participating in the RBI’s digital rupee initiative may conduct digital currency transactions.
Banks will distribute the retail digital currency. Person-to-person (P2P) and person-to-merchant (P2M) digital currency transactions are possible (P2M). QR (Quick Response) codes shown at merchant locations may be used to make payments to retailers. The RBI has declared unequivocally that consumers will be able to utilize digital rupees to purchase things and shop at their local Kirana outlets. “The e-Rupee would provide physical currency attributes such as trust, safety, and settlement finality,” the RBI said.
What distinguishes it from crypto coins?
There is no direct comparison between the digital rupee and cryptocurrencies since, unlike cryptocurrencies, the digital rupee is neither a commodity nor a virtual asset. Because the digital rupee is identical to banknotes, it may be traded for cash. ” A digital rupee, unlike cryptocurrencies, is neither a commodity nor a claim on a commodity or digital asset. Bitcoins have no issuer and are not cash equivalents. The digital rupee is the digital equivalent of banknotes produced by central banks such as the RBI and should be convertible into cash. The widely utilized CBDC, which the RBI will continue to issue, will serve the same function as cryptocurrencies but will not be a decentralized asset. The digital rupee may be used as legal money for any purchase. Digital rupees may be obtained using digital wallets, NEFT, and IMPS.
Also read: Best apps for Cryptocurrency: Top 5
How can I get digital rupees?
Users will be able to buy digital currencies from banks that have been authorized by the RBI. They must access the official app or website of one of the four recognized banks. Individuals may purchase it even if they do not have a bank account with the issuing bank. While it would be digital, the e-rupee would include real currency characteristics.
It will function similarly to cash withdrawals from your bank account, except that instead of getting cash, banks will credit your e-rupee to your wallet. You may then use it in the same way you would ordinary currency. The Reserve Bank of India has ordered banks not to record transactions worth less than Rs 50,000.
The digital rupee should not be mistaken for an investment, which means that utilizing it will not yield any income.
Is the digital rupee transferrable?
Because digital currency is just your money in digital form, it may be readily transferred to friends and family members. However, for the time being, only SBI, ICICI Bank, Yes Bank, and IDFC First Bank may handle CBDC-R transfers. It may be held in Paytm or any other payment wallet, just like regular money.
The distinction between UPI and E-Rupee
E-rupee does not need a bank account to be used. Although analysts have observed that UPI transactions need a bank account and a debit card, an E-Rupee wallet may be used without either of these, making it a more convenient payment alternative. With retail CBDC, customers should be able to trade without the participation of a bank (much as with physical money), and it is a digital transfer from person to person without the need for a bank intermediary. The e-rupee would be issued in the same denominations as physical money.
All accounts are handled by a single person.
The UPI ID, or handle, varies by institution and service. While the UPI ID created while connecting the same bank account to two separate platforms may change, the e-Rupee ID remains constant. The digital rupee will be managed by the RBI rather than bank middlemen, as is the case with UPI, where each bank has its own UPI handler. Each e-rupee transaction will need just one public key (address).
There is no need for physical money back up.
UPI transactions are supported by physical currency. The transaction will fail if there is insufficient money in the user’s bank account. The e-rupee, on the other hand, may be used to make digital payments instead of conventional money or currency. The digital rupee issued by the RBI is completely legal tender in India. Physical cash is not required to back it up.
The digital rupee is distinct from UPI in that it may be exchanged into other currencies, such as bank deposits, but it does not generate interest like cash. Banks are in charge of digital money, or UPI, payments. The RBI, on the other hand, is in charge of the digital rupee. The digital rupee, or e-Rupee, will be accessible for use by customers using a digital wallet given by participating banks and held on mobile phones or other devices rather than the designated UPI applications.
Why would individuals utilize the e-Rupee when UPI is so effective?
UPI is based on a settlement between two banks. That is, money transfers happen quickly on the front end, while inter-bank settlements take around a day to complete on the back end. Because there is an intermediary engaged in UPI, there is a settlement risk. However, since the e-Rupee is issued by the RBI, there is no settlement risk, and it may be quicker.
Furthermore, while UPI is a bank-to-bank payment channel, it leaves a transaction or audit trace, but the e-Rupee does not because it is a wallet-to-wallet transfer. The RBI will probably enable anonymity in e-Re transactions, at least for small-ticket transactions. Those who do not need an audit record will prefer e-rupee over UPI.
Moreover, users probably won’t have to pay anything to use the e-Rupee since cash is free to use. UPI is now free, but it may become chargeable in the future.
Users may switch from UPI to e-Rupee if it proves to be efficient and trustworthy with no technological flaws.
Those who want to retain their money in and make payments with these interest-earning savings will continue to favor UPI.
THANKYOU FOR READING We hope this article was helpful. If it was then let us know in the comments down below. Here are a few recommendations for you. 4 Reasons Why Elon Musk Bought Twitter New Features of Your Favorite Website