Digital Rupee : All you need to know

1. Digital Rupee is India's first official Central Bank Digital Currency (CBDC) issued & regulated by RBI. CBDC is a digital form of sovereign currency notes issued by a country's central bank. 
   
   
2. There will be two categories of Indian Digital Rupee viz. e-Rupee Wholesale (e₹-W) & e-Rupee Retail (e₹-R). 
   
   
3. Retail Rupee would be available for use by all viz. private sector, non-financial consumers and businesses while Wholesale Rupee would have restricted access for select financial institutions only.
   
   
4. e-Rupee differs from cryptocurrency for the following reasons :
• Cryptocurrency is a decentralized currency while e-Rupee is highly centralized form of digital currency. It will be controlled & regulated by RBI, the sovereign central bank of India.
• There will be no fluctuations in the value of e-Rupee unlike a cryptocurrency. 
• e-Rupee will be a legal tender in India while cryptocurrencies are not.
  
  
5. Initial launch phase of e₹-Wholesale has already been started w.e.f 01 November, 2022 and the first phase of e₹-Retail starts w.e.f 01 December, 2022.
   
   
6. In its initial launch phase, the e₹-R pilot project would cover selected cities (Mumbai, Delhi, Bengaluru & Bhubaneswar) in a closed user group comprising participating customers & selected banks (SBI, ICICI Bank, Yes Bank & IDFC First Bank). 
   
   
7. In its next phase the project would cover additional cities like Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla including additional banks like Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank
   
   
8. Some noteworthy features of e₹-R :
• e₹-R will be freely convertible against commercial bank money and cash
• e₹-R will be held on a digital wallet in your mobile phone/device. You can link your bank account to your digital e-rupee wallet to redeem/fund your e-rupee wallet.
• e₹-R would be available for use in both Person-to-Person (P2P) transactions as well as Person-to-Merchant (P2M) transactions.
• Payment to Merchants can be done using QR Code displayed at Merchant Stores.
• e₹-R would offer features of physical cash like trust & safety.
• e₹-R will reduce the cost of printing & issuing fresh currency and also the transaction costs.
  
  
9. Holding e₹-R in your wallet will not earn you any interest unlike money lying in your Saving Account. Just like cash in your pocket does not earn any interest, e-rupee in your mobile wallet will not earn any interest.
   
   
10. The primary difference between e-rupee and UPI is that there is an intermediary (bank) between sender and receiver. However in case of e-rupee there will be no intermediary. Money will directly flow between sender and receiver without any third party intermediary.
     
11. To know more about the whole concept of e-Rupee you may please refer to the below link to RBI's Concept Note on Central Bank Digital Currency :
• https://rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=1218

Author's Personal Opinion : No interest on holding e₹-R will be a major setback of e₹-R ecosystem. There is no incentive to hold e₹-R in your digital wallet. Further UPI has already been a major gamechanger for the digital payments ecosystem, hence there is no added advantage in using e₹-R instead of UPI as a mode of digital payments.