Indians are going crypto-crazy. Even the 30% tax slab didn’t hinder their way of using cryptocurrencies. Looking at the hype and potential benefits, the Reserve Bank of India launched a Digital Rupee pilot project. There must be simmering doubts about what the Digital Rupee concept is offering that got many countries around the globe to adopt it in their financial system.
As most people know, cryptocurrency has reshaped the idea of money, and this raises a question about what to expect from the Digital Rupee, eINR or E-Rupee.
Before we get into its use cases and its implementation, we will discuss what is Digital Rupee (e₹). Why is everybody going crazy over it all over the media? And what’s a great deal about eINR and why it’s necessary to know it all.
The wide acceptance of digital currencies leaves nothing but us to understand the reason for their growing demand and scope.
“Power of money does not come from possession; the true power of money can only be realized by controlling it on your own accord.”
~Jahnu Jagtap
What is the Digital Rupee or eINR?
Digital Rupee, as its name suggests, is the tokenized version of the Indian paper currency. By scanning a QR code, eINR enables users to purchase and spend digitally. The Reserve Bank of India launched the Digital Rupee for a risk-free transaction process. The term is segmented into two variants given below.
Types of Digital Rupee
The Central Bank of India has developed two types of Digital Rupee to better understand its potential in the future of India’s financial system.
- e₹-W or CBDC-W for Wholesale Purposes
The wholesale Digital Rupee will help Banks and Financial Institutions to perform internal transactions. As of now, government securities are transferred by approved banks in the secondary market.
- e₹-R or CBDC-R for Retail Purposes
The retail Digital Rupee will help non-financial consumers, private sectors, and businesses. RBI launched Digital Rupee for retail in the four major cities, Mumbai, New Delhi, Bangalore, and Bhubaneswar.
Now that you understand what the Digital Rupee is, let’s check out how it works.
How Does Digital Rupee Work?
The e₹ pilot will conduct a real-time assessment of the retail use of Digital Rupee, distribution, and the stability of complete creation. To assess the potential of Digital Rupee in the Indian Financial sector, RBI has formed a closed user group (CUG). This CUG group consists of selected merchants and customers from the above-mentioned locations.
RBI issued e₹ in the same denominations as followed by paper currency and coins. Acting as an intermediary, selected banks will distribute these tokens. RBI has selected eight banks for phase-wise participation in the retail pilot project.
The first phase includes the State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. The Bank of Baroda, the Union Bank of India, the HDFC Bank, and the Kotak Mahindra Bank will participate in the retail pilot as it commences the next phase.
How Can I Use the Digital Rupee?
These banks have rolled out special wallets which customers can use via smartphones, laptops, or computers to get access to the e₹.
Users can opt for both person-to-person (P2P) and person-to-merchant (P2M) transactions using QR codes displayed at malls or shops.
Users can convert the Digital Rupee into other forms of money like bank deposits, but it will not earn any interest.
Furthermore, the RBI will evaluate different uses and aspects of the digital token according to this assessment.
Well, you must be having some doubts at the back of your mind. So, let’s start clearing them one by one.
Also Read: CBDC vs. UPI: Decoding the Differences in Digital Payment Systems
FAQs
Q1. Where Can I Get a Digital Rupee?
Ans: You can get eINR from the four banks that the RBI has licensed. They are the State Bank of India, Yes Bank, ICICI Bank, and IDFC First Bank.
Q2. Do I need a new Bank Account for Digital Rupee?
Ans: No, you don’t need a new Bank account for Digital Rupee. As it is a flexible legal tender, you can use it even if you don’t hold a bank account.
Q3. Can I Buy Anything with a Digital Rupee?
Ans: You can use the retail Digital Rupee or CBDC-R to buy anything from a store or mall with the QR code that accepts digital currency.
Q4. Can I send a Digital Rupee to my Family and Friends?
Ans: Yes, you can make a transaction or send it to friends or family just as your physical currency. But keep in mind that both you and the person receiving the transaction must have a digital wallet, as Digital Rupee is a tokenized form of your money.
Q5. What is the Difference Between Digital Rupee and UPI?
Ans: Digital Rupee is another form of paper currency that can be withdrawn from a bank account. While UPI is an interface where you can make transactions of your physical money.
Q6. Is Digital Rupee Safe?
Ans: Digital Rupee is equivalent to paper currency and offers the same trust, safety, and settlement finality. To be frank, it is more secure than its traditional counterpart for payment and settlement as it is a direct liability of the Central Bank. Central banking also limits it from being volatile like other blockchain-based cryptocurrencies.
