What is digital rupee and how it will work: How is RBI retail e-Rupee different from UPI, NEFT, RTGS
The Reserve Bank of India (RBI) recently launched the pilot for its digital rupee — India's very own digital currency. A central bank digital currency (CBDC) is a legal tender issued by a central bank in digital form. It is the same as a fiat currency and it is exchangeable one-to-one with government-issued money. Simply put, the digital rupee is the same as a banknote or coin that we use daily, only it is in a digital form.
How is the RBI's retail digital rupee different from Unified Payments Interface (UPI), National Electronic Funds Transfer (NEFT), and Real Time Gross Settlement (RTGS)? Let's find out.
Understanding digital rupee
The retail digital rupee is a digital token issued by the Reserve Bank of India (RBI). The central bank has identified eight banks for the phase-wise pilot launch of the retail digital rupee. Four banks including Sta ..
At present, customers will be able to transact using the digital rupee through a digital wallet offered by the participating banks in the pilot programme. The digital wallet can be saved on an Android smartphone. Currently, customers and merchants in closed user groups (CUG) in select locations in Mumbai, New Delhi, Bengaluru, and Bhubaneswar can use retail e-Rupee via the e-wallets of the above-mentioned four banks taking part in the launch, according to RBI
Differences between e-Rupee and UPI, RTGS, and other payment options
1) e-Rupee is legal tender, not a payment medium
e-Rupee is an electronic form of sovereign currency while UPI applications such as Google Pay, PhonePe, NEFT, and RTGS are different methods of transferring funds or payment mediums. "The main difference is that UPI transactions are completely backed by physical currency and the digital rupee is a legal tender not supported by a physical currency," explained Rachit Chawla, CEO of Finway FSC, a fintech firm.2) Digital rupee is not limited to just currency
It must be mentioned that the usage of the e-Rupee is not limited to payments as it is a type of currency. The digital rupee also serves the purpose of being a 'unit of account' and more importantly, a 'store of value', said Ajay Rajan, Country Head – Transactional Banking, YES Bank.3) No intermediation of banks
Digital transactions in UPI or NEFT or RTGS must go through a bank while in the case of the e-Rupee, the money gets transferred from one wallet to another.Clarifying the difference between the digital rupee and UPI, RBI Governor Shaktikanta Das had said during a press conference on December 7, 2022, "Any UPI transaction involves intermediation of the bank.
