INDIAN MARKET

Introduction to E₹-rupee?

The Story- E₹ or CBDC

In December 2022, the Reserve Bank of India (RBI) began a pilot programme for the country's own digital currency i.e e-rupee , attempting to bring in a revolution in how people hold and use money.

explanation of cbdc technology — INDIA's Digital Currency

India is witnessing massive growth in digital transactions, the volume and value of Unified Payments Interface (UPI) transactions increased by 118% in 2022.

That's perfectly fine! But why is the government introducing digital money when other electronic payment processing methods (such as upi) already exist?

This makes it important to know what CBDCs are, how they are different from cryptocurrencies and UPI transactions, and also about the safety concerns associated with it.

What is E₹ or CBDC?

E-rupee is a virtual representation of India's fiat money. E-rupee is a legal tender issued by the RBI in digital form.

A central bank digital currency (CBDC) is the digital form of a country's fiat currency and is exchangeable one-to-one with the fiat currency.

Agenda Of E₹ (E-Rupee)

According to the RBI, the digital currency will be supported by the state-of-art payment systems, which are affordable, accessible, convenient, safe, and secure.

How the e-rupee will work?

SYNOPSIS

As per RBI, CBDC can be demarcated into two broad types:
Retail E-rupee & Wholesale CBDC.
RBI Aims to involve 50,000 merchants, customers in the next few days.

1. Retail E-rupee

It is an electronic version of cash that is primarily designed for small-scale retail transactions. RBI creates Rs 1.71 crore of digital currency for retail pilot.

2. Wholesale CBDC

It is made to only be accessed by a small number of chosen financial institutions. The RBI started a CBDC wholesale pilot programme for trading in the secondary market for government bonds.

Implementation of Pilot Project

For the first phase of the pilot, the central bank has identified four banks — State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank — in four cities: Mumbai, New Delhi, Bengaluru, and Bhubaneswar.

In the next 2-3 weeks, Four more banks will join the pilot project: Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank — in nine cities: Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.

❝ The e-rupee is very different from cryptocurrency due to its highly centralized nature.

— RESERVE BANK OF INDIA

What are the Advantages of E-rupee?

The following are the advantages of E-rupee digital currency :

The RBI spent 4,984.8 crores on security printing of banknotes purchased from printing presses in fiscal year 2021-22.
CBDC or E-rupee has the potential to reduce dependency on cash, which would reduce the operational costs.
Move unregulated financial activities into regulated areas to ensure better regulatory and tax compliance.
Speed up the domestic payment and settlement process in part by phasing out paper money.
Reducing Dependency on Dollar.
Reduce currency handling costs.
Globalisation of Payment System.

FAQs on E₹ (E-rupee)

Is e-rupee value is different from the physical banknote?

The digital rupee bears the same value and legitimacy as a banknote or a coin, except that it takes no physical form—which makes transfers and settlements easier and more efficient.

Is India the first country towards using digital currencies?

Many countries have so far fully implemented a digital currency, according to think-tank the Atlantic Council.
China and the US are either testing their own version of digital currency or preparing to roll it out.