Reserve Bank of India (RBI) has launched a pilot project for digital rupee (e₹) in 4 Indian cities viz. Mumbai, Delhi, Bengaluru and Bhubaneshwar on 1st December, 2022. The residents of these four cities can use the digital wallets which will issued by the partnering banks to exchange digital Rupees. State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank and IDFC First Bank are participating in the pilot project and are called as partnering Banks. These eight banks have joined the Pilot Project in two phases. This wallet can be downloaded on the Mobile or any other device.
The Digital rupee which is a digital currency, is virtual money and it will serve the same purpose and will have the same value as the physical currency. Thus, the value of 1 Digital Rupee will be equal to Rs. 1 in cash. Anyone can carry out digital rupee transactions with merchants and individuals. The digital rupee is issued by Reserve bank of India while the distribution of the digital rupee is undertaken by the participating banks or partnering banks. The Digital Rupee App is launched by these 8 banks.
These eight participating banks have launched their digital rupee app to make transactions more accessible. The process to buy & transact in digital rupee is as follows:
- Visit participating banks’ official app
- Register for e-wallet
- Selection for Closed User Group (CUG) for participation in the digital Rupee pilot project
- Load money in the e₹- wallet, similar to a physical wallet but in digital form from the account linked to the bank or UPI apps
- Transact using QR codes displayed at shops or malls to pay with an e-rupee.
The digital rupee issued by RBI is an electronic token and the digital rupee can be opted for both Person-to Person (P2P) to Person-to-Merchant (P2M) transactions. Through QR Codes
Characteristics of the Digital Rupee:
- The e₹-R is in digital form but possesses all features of physical cash like safety, settlement finality, trust, etc.
- The digital rupee is eligible to be converted to other forms of money like bank deposits without any interest.
The pilot project is to conduct a real-time assessment for the use of digital rupees for the retail transactions, distribution and to evaluate the different uses and aspects of the digital token.
Central Bank Digital Currency (CBDC) is different from cryptocurrency in all aspects but still it can be compared with crypto in fields of benefits. The notable advantage of CBDC (Digital Rupee) is that the digital rupees is accepted as legal tender and can be utilised for means of payment, safe deposits, etc.
Advantages of Digital Rupee (e₹-R wallet):
- The CBDC (e₹-R wallet) is a sovereign currency issued by the RBI in accordance with their monetary policy.
- Ease of conversion of digital money into cash or commercial bank money.
- The digital rupee is a flexible legal tender and can be used even without having a bank account.
- The e₹-R wallet cannot be destroyed by tearing apart, burning, or other physical damage.
- Digital money is equal to paper currency. Hence, its life is long as your paper.
- The e₹-R wallet is governed by Reserve Bank of India. Thus, it has a low risk of being volatile and provides security to its user.
Types of RBI digital rupee to be launched in India
Reserve Bank of India will have two types of digital rupee in India, namely Retail or general purpose (CBDC-R) and Wholesale (CBDC-W). Non-financial consumers, private sectors, businessmen, etc., can use CBDC-R, while the use of CBDC-W is restricted to selected financial institutions such as interbank transfers.
RBI launches as a pilot project the digital rupee in India to offer a safe and hazardless digital experience during monetary transactions.
The introduction of India’s Digital Rupee is more than a technological innovation; it’s a monumental leap towards a more efficient, secure, and accessible financial ecosystem. With the potential to revolutionize cross-border transactions, enhance financial inclusion, and drive economic growth, the Digital Rupee signifies India’s commitment to embracing digital advancements for the betterment of its citizens and the global financial landscape. As the digital currency era unfolds, India is poised to emerge as a trailblazer, setting new benchmarks for the future of money.