Introduction 

Digital rupee, the pilot of its central bank digital currency (CBDC),launched by reserve bank of India (RBI) on 1 December,2022 is categorized as legal tender in digital form. This lands India among 10 countries which have taken a lead to launch digital currency. E rupee or digital rupee or CBDC are all the same and is India's official digital currency. 

Many consider it as a bitcoin or crypto-currency of India and many people are not even aware about it. This blog contains all the information about the digital rupee and gives clear idea about digital rupee and crypto-currency. 

What is Digital currency?

Digital currency is the digital form of paper currency launched by RBI. CBDC is a sovereign currency issued by RBI that appears as a liability on the RBI's balance sheet. It is freely convertible against commercial bank money and cash. It is a legal tender and a safe store of value by all citizens,enterprises and government agencies. It is fungible legal tender for which holders need not have a bank account. It is launched with the aim to reduce money printing and transaction verification cost. E rupee should not be confused by e-rupi of UPI.

How they look?

They are designed in same there as the paper note. The paper currency is known as note the same way the digital currency is known as token. There is a unique serial number on each token with signature of RBI. It contains token starting from 50 paise to 2000 rupees. 



How to access and use?

It is not yet ruled out for everybody but some banks have started it. To access one need to download the app of their bank and then register. After verification amount can be transferred easily by number, QR or any other convenient method. At present it is linked to bank account but in future one can transfer to anyone irrespective of their bank account. The money is exchanged in the same way as paper currency that means the same serial number token is transferred to the other person. Government is currently planning to make UPI QR code interoperable.



What happens in case of exchange?

In case you have to transfer rupees 150 to a person and you gave 200 then the amount is transferred to the bank and then the bank makes the transaction and balance amount is returned. 

E rupee vs Bitcoin

Bitcoin is a decentralized public blockchain based while e rupee is centralized private blockchain based technology. E rupee is controlled and backed up by RBI whereas bitcoin is not controlled by any organisation and doesn't have intrinsic value. Bitcoin is not a legal tender and is considered as a digital asset while e rupee is legal tender in India considered as currency issued by RBI. On Bitcoin 30% tax is charged while e rupee is tax free. 

How e-rupee is different from UPI?


UPI is just a payment mechanism to make payments online where is e rupee is actually cashless digital currency that would replace paper currency in future. UPI still requires bank account while in e rupee a person without bank account can also make transactions easily. In UPI anonymity of transactions is less as compared to e rupee. RBI announced to keep the transaction of small value anonymous and traceable for high value transaction in e rupee. 

Benefits of E rupee

E rupee helps in reducing money printing and transaction verification expenses that costs about 4.5 to 5 thousand crores. If this cost is reduced to a significant amount then it would help in country's development. It is faster and secure and it eliminates hassles of going to an ATM to withdraw cash. It improves cross border transactions and helps to carry out cheaper global transfers. It is safe and secure and entire back end is provided by RBI and transaction data is not saved in banks. It can also help in reducing corruption as the entire transactions details would be under RBI and can be checked anytime. Unlike cash it cannot be collected and hidden as black money. 

Unlike other payment apps it has no limit on number of transactions. Moreover, it has 24/7 availability and one doesn't need to wait for banks to open and they are free from unexpected bank protests that leads to delay in payments. Digital assets can make these transactions cost effective and quick.

Problems with digital currency and is India ready for it?

Since there are many remote areas in India where there are no internet facilities and many village people do not own and know how to use mobile phones. Therefore, it would require great investment to expand network over remote areas and make people aware. A proper check of network is needed as if the network is not available in a particular area then it may lead a person in trouble. It would take time to adapt to E rupee as many people still are unaware of online payments. Moreover, there would be issues of cyber attacks.

As all the amount would be digitally available people won't be able to have a backup for emergency situations. There would be no control on savings and since the amount will not be in bank people will not get interest on their money.

If people will convert to digital currency it would distrupt the banking system. This would hinder bank's capacity to give loans since the ability of banks to give loans is influenced by the amount of cash in bank. 

Conclusion

Digital currency is definitely a good option to switch to paperless currency and reduce money printing costs. However, in India it would take time to be successful. With its advancement, we may overcome the challenges. Great things never come easily.  

Will it be successful? What do you think? Comment down your views.