In recent years, the way we spend, save, and transfer money has undergone a rapid transformation. The latest entrant in India’s financial landscape is the Digital Rupee (e₹) – a central bank digital currency (CBDC) issued and regulated by the Reserve Bank of India (RBI). But what exactly is the e₹, and how is it different from the digital money we already use?
Let’s break it down in simple terms with insights from chartered accountant Abhay Asknani, who specialises in financial systems and regulations.
What Is The Digital Rupee?
The Digital Rupee (e₹) is the electronic version of India’s fiat currency, meaning it has the same legal status as physical cash – but exists entirely in a digital format. It’s not like cryptocurrency, which is decentralised and often volatile. The e₹ is backed by the RBI, making it stable, secure, and trustworthy.
’Think of it as holding a ₹500 note in your digital wallet instead of your physical one,’ explains Abhay Asknani. ’It’s real money, not a payment through your bank account, credit card, or a private app.’
How Does It Work?
There are two types of Digital Rupee currently being tested:
· Retail e₹ (e₹-R): Meant for everyday consumers like you and me, for purchases, peer-to-peer transfers, or online shopping.
· Wholesale e₹ (e₹-W): Used by banks and financial institutions to settle transactions more efficiently.
To access e₹, users must download a CBDC wallet, often offered by partner banks such as SBI, ICICI Bank, or HDFC. Once set up, you can load e₹ into your wallet and use it to pay at shops, send money to friends, or receive payments – all without involving an intermediary like UPI or a credit card.
Why Is The e₹ A Game-Changer?
According to Abhay Asknani, the introduction of the e₹ could bring several benefits:
· Reduced cost of cash management: ’Printing, storing, and transporting currency notes is expensive for the RBI. The e₹ can lower these costs significantly.’
· More efficient transactions: Payments made using e₹ are instant and final, eliminating the risk of pending settlements or failed transfers.
· Inclusion and transparency: The digital rupee can empower unbanked individuals by giving them access to digital payments without needing a traditional bank account. Plus, all transactions are traceable, which may help in curbing corruption and black money.
Is It Safe?
The RBI is treading carefully. Unlike cryptocurrencies, which can fluctuate wildly and are not issued by any government, the Digital Rupee is regulated and monitored by the RBI.
’Users can trust that their money holds its value and is accepted everywhere just like a regular rupee note,’ assures Asknani. ’It’s the safety of a sovereign guarantee with the convenience of digital technology.’
How Is It Different From UPI Or Mobile Wallets?
While apps like UPI or Paytm facilitate digital payments, the actual money sits in your bank account, and the app is just a medium to transfer it. The e₹ is money itself – like physical cash – just in digital form.
Abhay adds, ’You don’t need a bank transaction to use e₹. It’s more like transferring a digital coin from your phone to someone else’s, with no middleman.’
What’s Next For The e₹?
The RBI began pilot testing the Digital Rupee in late 2022. As of now, it's being rolled out in select cities and banks. Experts believe a wider rollout will happen gradually, once technical challenges and public adoption are addressed.
Asknani believes that mass awareness and ease of use will determine how fast the Digital Rupee becomes mainstream. ’It could complement physical cash and existing digital tools – not replace them right away,’ he says.
The Digital Rupee is a bold step towards modernising India’s monetary system. It combines the trust of traditional currency with the efficiency of digital technology – and could make payments faster, more secure, and more inclusive.