India's' first digital currency [e -₹]

RBI on first of November and first of December rolled out [launched] India's first ever Central bank digital currency [CBDC], commonly known as digital rupee or e rupee.

India's' first digital currency [e -₹]

RBI on first of November and first of December rolled out [launched] India's first ever Central bank digital currency [CBDC], commonly known as digital rupee or e rupee. It was launched in pilot-mode in two segments broadly i.e., wholesale and retail segment, that too in a closed user group comprising of participating banks, merchants and customers.

Essence of e- rupee

RBI in its recent and detailed concept note explained in detail the functioning of CBDC, motives behind introducing and governing structures it followed while implementing it. Also, it tries to examine the possible effects of CBDC on economic and financial system, monetary policy and financial stability and privacy of users.

It stated central bank digital currency would be fiat money and legal tender, just in digital form. It would be direct liability of RBI. 

Further, taking about its forms, CBDC [w] would be account based and CBDC [R] token based. CBDC [w] is for financial institutions dealing in financial securities [such as g-bonds, g-secs] transacting with cooperates, government, RBI and with each other. Earlier, RBI's intervention was required to carry out and settling counter-party transactions. With this, efficiency in transactions is expected to increase, and costs to decrease and mitigation in settlement risks. 

For Retail launch, 8 banks have been identified of which 4 banks [ state bank of India, ICICI, Yes bank and IDFC first bank] are participating and additionally 4 more will follow suit in next phase. CBDC [R] is in the form of digital token, and would be issued in same denominations as paper currency and coins. It would be non-remunerative i.e. It will not carry any interest or incentive on holding it in CBDC wallet just like cash. It will be distributed through financial intermediaries i.e., banks. It can be converted to other forms of money like cash or deposits with banks.

What is the problem with physical currency?

RBI clearly stated that e rupee is being introduced, not to eliminate physical currency from financial system, but to supplement it. Before demonetization our economy had nearly 17 trillion of currency in circulation, however this figure rose to 30 trillion by October, 2022. 

Simply putting, managing of cash in physical form is a tedious and difficult task. Alongside, its minting and handling, maintenance and distribution charges makes it even more costly affair.

As a viable alternative, becoming cashless and going digital has many benefits. The digitally authentication of online transactions helps in maintaining transparency and traceability of transaction thereby helping in curbing out corruptions and black money. Government aids and subsidies can effectively reach to intended beneficiaries without leakages and spillovers in system. And in such formalized system, growth is inevitable.  


Unified payment interface [UPI] developed by NPCI is a major success of India in terms of digital payments. This flagship program recorded 7.3 billion transactions in October in 2022 amounting to 12.11 trillion rupees, highest since inception in 2016.

Two are not same. UPI is a gateway or a platform that allows real time payments for transactions, and exchange of money between bank accounts, whereas, CBDC is a currency just in digital form. UPI involves intermediators like banks for settlement of transactions, but no such entities are involved in CBDCs and its directly backed by RBI.


There are few similarities and many differences between them. Crypto currency is highly volatile, free from authority oversight, works on highly decentralized blockchain ledger. But, such uncertainty in monetary system could negatively impact an economy. CBDCs are build using same underlying technology i.e., blockchain, only difference being it would be under continuous monitoring of authorities making it centralized in a way.

Cryptos work on public blockchain with open access are highly prone to unscrumptious hijacks, but CBDC operate on authorized networks, with each unit traceable and identifiable making it safe and secure. It uses private permission blockchain network. The recorded transaction details will be available to sender, receiver and bank only, thereby maintaining privacy of user. Through its use, crypto meltdown can be contained, and there will be no expected spillovers to other assets. 

Future prospectus  

The fintech world is now on a transition to a major transformation with CBDC occupying central seat. New digital rupee is expected to support India's digital ecosystem, spur financial inclusion and further revolutionaries the way monetary and payment systems and settlements operated.