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Sansad TV: Perspective- e-RUPI : Digital Currency Push





The Reserve Bank of India will soon commence limited pilot launches of the digital rupee for specific use cases. A concept note on the Central Bank Digital Currency was released on Friday. It explains the objectives, choices, benefits and risks of issuing digital rupee. The 51-page document also discusses key considerations such as technology and design choices, possible uses of Digital Rupee, issuance mechanisms… at the same time examining the implications of introduction of CBDC on the banking system, monetary policy, financial stability and privacy issues.

What is the CBDC or National Digital currency?

  • A Central Bank Digital Currency (CBDC), or national digital currency, is simply the digital form of a country’s fiat currency.
  • Instead of printing paper currency or minting coins, the central bank issues electronic tokens. This token value is backed by the full faith and credit of the government.

Working of e-RUPI:

  • e-RUPI is a cashless and contactless digital payments medium, which will be delivered to mobile phones of beneficiaries in form of an SMS-string or a QR code.
  • This will essentially be like a prepaid gift-voucherthat will be redeemable at specific accepting centres without any credit or debit card, a mobile app or internet banking.
  • e-RUPI will connect the sponsors of the services with the beneficiaries and service providers in a digital mannerwithout any physical interface.
  • It is important to note, however, that e-RUPI is neither a cryptocurrency nor a central bank digital currency (CBDC). It is also not a digital or e-wallet either, which may admittedly sound strange to some.

Need for a CBDC:

  • The growth of cryptocurrencies such as Bitcoin, Ethereum etc has raised challenges to fiat currencies.
  • Along with their other vulnerabilities made the central bank of each country explore the possibility of introducing their own digital currencies.
  • A 2021 BIS survey of central banks, which found that 86% were actively researching the potential for such currencies, 60% were experimenting with the technology, and 14% were deploying pilot projects.
  • The need for inter-bank settlement would disappear as it would be a central bank liability handed over from one person to another.

India future in digital currency:

According to the RBI, there are at least four reasons why digital currencies are expected to do well in India:

  • One, there is increasing penetration of digital paymentsin the country that exists alongside sustained interest in cash usage, especially for small value transactions.
  • Two, India’s high currency to GDP ratio, according to the RBI, “holds out another benefit of CBDCs”.
  • Three, the spread of private virtual currenciessuch as Bitcoin and Ethereum may be yet another reason why CBDCs become important from the point of view of the central bank.
  • Four, central bank digital currency (CBDC) might also cushion the general public in an environment of volatile private VCs

Significance of e-RUPI and how is it different than a digital currency:

  • The government is already working on developing a central bank digital currency and the launch of e-RUPI could potentially highlight the gaps in digital payments infrastructure that will be necessary for the success of the future digital currency.
  • In effect, e-RUPI is still backed by the existing Indian rupee as the underlying asset and specificity of its purpose makes it different to a virtual currency and puts it closer to a voucher-based payment system.
  • Also, the ubiquitousness of e-RUPI in the future will depend on the end-use cases.
  • Even the private sector can leveragethese digital vouchers as part of their employee welfare and corporate social responsibility programs.


  • According to government, e-RUPI is easy, safe and secureas it keeps the details of the beneficiaries completely confidential.
  • The entire transaction process through this voucher is relatively fasterand at the same time reliable, as the required amount is already stored in the voucher.
  • e-RUPI is expected to ensure a leak-proof delivery of welfare services. It can also be used for delivering servicesunder schemes.
  • The government also said that even the private sector can leverage these digital vouchers as part of their employee welfare and corporate social responsibility programmes.
  • It also guarantees that the service provider is only paid once the transaction has been completed.