indian digital rupee essay

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e-Rupee: Here’s a Quixplained on India’s first official digital currency

India's first digital currency: what exactly is the e-rupee, and how will it work what is the need for it take a look..

India launched its e-Rupee on Thursday (December 1). The Reserve Bank of India’s Central Bank Digital Currency (CBDC) is an electronic version of cash, and will be primarily meant for retail transactions. The pilot will initially cover the four cities of Mumbai, New Delhi, Bengaluru, and Bhubaneswar. Four banks will be involved in the controlled launch of the digital currency in these four cities: State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank.

What exactly is it, and how will it work? What is the need for it? Take a look.

According to the central bank, the pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real time “Different features and applications of the e?-R token and architecture will be tested in future pilots, based on the learnings from this pilot,” it said.

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Baba’s Explainer – India’s Digital rupee: CBDC

• December 1, 2022

• GS-3: Money & Banking; RBI and its monetary Policy
• GS-2: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Context: Reserve Bank of India (RBI) has announced the launch of India’s much-awaited Central Bank Digital Currency (CBDC), a sort of official cryptocurrency, for retail users from December 1.

• Definition: RBI defines the CBDC as the digital form of currency notes issued by a central bank. It is a sovereign or entirely independent currency issued by the central bank (in this case, RBI), in accordance with the country’s monetary policy.
• RBI is not in favour of e-rupee with interest. Because people might withdraw money from banks and convert it to digital rupee – causing banks to fail.
• Blockchain Technology: The underlying technology of cryptocurrency and the digital rupee system will be blockchain technology. However, cryptocurrencies like bitcoin or ethereum are ‘private’ in nature. Digital rupee on the other hand, will be issued and controlled by the RBI. E-rupee would move away from the competitive ‘mining’ of private cryptocurrencies to an algorithm-based process.
• Global Scenario: As of July 2022, 105 countries were exploring CBDC. Ten countries have launched CBDC, the first of which was the Bahamian Sand Dollar in 2020 and the latest was Jamaica’s JAM-DEX.
• CBDC seems to be a natural next step in the evolution of official coinage (from metal- based money, to metal-backed banknotes, to physical fiat money)
• fostering financial inclusion
• Reducing costs associated with physical cash management
• Introducing a more resilient and innovative payments system.
• More importantly, it would provide the general populace an alternative to unregulated cryptocurrencies and their associated risks.
• The e₹ can be converted to any commercial bank money or cash. It would be a fungible legal tender for which holders need not have a bank account – hence, strengthening the cause of financial inclusion.
• Issuing CBDC allow central banks to more effectively satisfy public policy goals, including operational efficiency, financial stability, monetary policy effectiveness, and financial integrity.
• On the basis of usage and the functions performed by the digital rupee and considering the different levels of accessibility, CBDC can be demarcated into two broad categories — general purpose (retail) (CBDC-R) and wholesale (CBDC-W).
• Retail CBDC is an electronic version of cash primarily meant for retail transactions. It will be used by all — private sector, non-financial consumers and businesses.
• Wholesale CBDC is designed for restricted access to select financial institutions. It has the potential to transform the settlement systems for financial transactions undertaken by banks into government securities (G-Sec) segment, inter-bank market and capital market more efficiently and securely in terms of operational costs, use of collateral and liquidity management.
• Wholesale CBDC is designed for restricted access to select financial institutions. It has the potential to transform the settlement systems for financial transactions undertaken by banks in the government securities (G-Sec) segment, inter-bank market and capital market more efficient and secure in terms of operational costs, use of collateral and liquidity management.
• The pilot will initially cover the four cities of Mumbai, New Delhi, Bengaluru, and Bhubaneswar, where customers and merchants will be able to use the digital rupee (e₹-R), or e-rupee.
• Four banks will be involved in the controlled launch of the digital currency in these four cities: State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank.
• The scope of the pilot may be expanded gradually to include more banks, users and locations as needed
• The e₹-R would be in the form of a digital token that represents legal tender. It will be issued in the same denominations as paper currency and coins, and will be distributed through intermediaries, i.e., banks.
• Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones and devices, according to the RBI.
• Payments to merchants can be made using QR codes displayed at merchant locations.
• The e₹-R would offer features of physical cash like trust, safety and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks.
• In effect, the retail e-rupee will be an electronic version of cash, and will be primarily meant for retail transactions. It will be potentially available for use by all — the private sector, non-financial consumers and businesses — and will be able to provide access to safe money for payment and settlement, as it will be the direct liability of the central bank.
• According to the central bank, the pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real time.
• Different features and applications of the e₹-R token and architecture will be tested in future pilots, based on the learnings from this pilot.
• The RBI had earlier said the key motivations for exploring the issuance of CBDC in India among others include reduction in operational costs involved in physical cash management, fostering financial inclusion, bringing resilience, efficiency and innovation in the payments system.
• It will add efficiency to the settlement system and boost innovation in cross-border payments space and provide the public with uses that any private virtual currencies can provide, without the associated risks.
• There are certain concerns pertaining to data collection and anonymity, cyber-security, dispute resolution and accountability.
• About concerns pertaining to data collection and anonymity, RBI notes that there emerges a possibility that anonymous digital currency would facilitate a shadow economy and illegal transactions.
• Regulators require insight to identify suspicious transactions, such as those pertaining to money laundering and terrorism financing, among others. Addressing this concern, the IMF recommends instituting a specific threshold (say $10,000) for regulatory oversight.
• RBI recognises there is an increased probability of payment-related frauds in countries with lower financial literacy levels . It states the ecosystem would be a “high-value target” since it is important to maintain public trust. Ensuring financial literacy and cyber-security thus becomes very important.
• However, RBI believes it could be mitigated to a large extent by technical solutions and imposing limits on offline transactions.
• It acknowledges the importance of enhancing offline capabilities for wider use, pointing to only 825 million of a total population of 1.40 billion having internet access in India.
• RBI would also explore the possibility of cross-border payments using CBDCs. In a related context, the IMF has observed that fragmented international efforts to build CBDCs would likely result in interoperability challenges and cross-border security risks .
• RBI highlights two broad concerns in the event of a financial crisis. There could either be a potential ‘bank run’ , in other words, people withdraw their money rapidly from banks, or a financial disintermediation that would prompt banks to rely on more expensive and less stable sources of funding.

Main Practice Question: What do you think are the challenges in adoption of Central Bank Digital Currency?

Note: Write answer his question in the comment section.

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• Digital Rupee launched - Its impact on Indian Economy and Banks

Digital currency launched by RBI shall be backed by the sovereign (central government), shall be a legal tender and shall act as a close substitute for paper currency for all its functions. Digital Rupee as a medium of exchange is expected to facilitate easier, faster, and cheaper methods of transacting business.

• Jyoti Prakash Gadia
• Published On Nov 5, 2022 at 08:00 AM IST

• By Jyoti Prakash Gadia ,
• By Jyoti Prakash Gadia
• Updated On Nov 5, 2022 at 08:00 AM IST

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A Study on Upcoming Central Bank Digital Currency: Opportunities, Obstacles, and Potential FinTech Solutions using Cryptography in the Indian Scenario

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Digital rupee pilot project launching: what is it and how will it work?

Syllabus: Indian Economy and related issues

  Direction: The article helps to understand about digital currency or CBDC, its advantages, and the working of the retail digital rupee.

Context: Reserve Bank of India (RBI) has announced the launch of India’s much-awaited Central Bank Digital Currency (CBDC), a sort of official cryptocurrency, for retail users from December 1.

About CBDC:

• CBDC is the legal tender issued by a central bank in digital form . This means, it is the same as a fiat currency and is exchangeable one-to-one with the fiat currency, but different in its form.
• The RBI has often expressed worries about private cryptocurrencies (Bitcoin, Ether) being used for money laundering, terror financing, and tax evasion.
• The introduction of its own CBDC has been viewed as a means of bridging the benefits and risks of digital currency.

Advantages of the e-rupee:

• Reduces operational costs involved in physical cash management
• Foster financial inclusion
• Improve transparency in money flows and could help reduce currency substitution (a country uses a foreign currency in addition to/ instead of, its own)
• Brings resilience, efficiency (to the settlement system), and innovation (in cross-border payments space) in the payments system
• Provide the public with the same benefits as private virtual currencies offer, but without the risks.

The launch of retail digital rupee:

• The pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real-time.
• About the retail digital rupee: It will be potentially available for use by all – the private sector, non-financial consumers, and businesses, and will provide safe-secure payment and settlement, as it will be the direct liability of the central bank .
• Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones and devices.
• Transactions can be both person-to-person (P2P) and person to merchant (P2M).
• Unlike cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks.
• Other type (wholesale): Earlier (Nov 1), the RBI launched the digital rupee for the wholesale segment to settle secondary market transactions in government securities.

Global examples:

• As of July 2022, there were nearly 100 digital currencies by various global central banks in R&D stages and two fully launched – the eNaira in Nigeria and the Bahamian sand dollar .
• Countries have different motives for exploring and issuing CBDCs, but the Bahamas issued them to serve unbanked and under-banked populations .

Insta Links:

RBI’s Digital Currency

Mains Links:

Q. While the intent of central bank digital currency (CBDC) and the expected benefits are well understood, it is important to identify innovative methods and compelling use cases that will make CBDC as attractive as cash, if not more. Discuss.

Prelims Links:

Recently the Reserve Bank of India (RBI) indicated that it will soon commence limited pilot launches of e-rupee, or Central Bank Digital Currency (CBDC). Consider the following statements in this context:

• E-rupee is the same as a fiat currency and is exchangeable one-to-one with the fiat currency.
• It can be accepted as a medium of payment, legal tender and a safe store of value.
• The digital rupee would appear as an asset on a central bank’s balance sheet.

Which of the above statement/s is/are correct?

Solution: a)

E-rupee is the same as a fiat currency and is exchangeable one-to-one with the fiat currency.  Only its form is different. It can be accepted as a medium of payment, legal tender and a safe store of value . The digital rupee would appear as a liability on a central bank’s balance sheet.

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Central Bank Digital Currency - The ‘digital rupee’ in India

Central Bank Digital Currency (CBDC) is a digital counterpart of government-backed fiat money. This kind of digital currency is connected to the nation's currency and issued by its central bank. The same would be the case with the ‘digital rupee’ in India as it will be backed by the central bank of India, i.e. RBI. The development of CBDCs is underway in more than 100 nations across the world, and it is in various phases. Some countries have already released their digital currencies, while some have abandoned or stopped working on their initiatives. Despite being strongly inspired by bitcoins, the idea of CBDCs differs from decentralised virtual currencies and crypto assets, which are not issued by the government and do not have the status of "legal tender." With the rising demand for cryptocurrencies, there is a rise in the government's concerns about the risks associated with the same and its tendency to facilitate money laundering and other forms of criminal financing, and thus the concept of CBDC is gaining momentum. Even though the RBI supports the growth of virtual and online currencies, it does not support ones like bitcoin because it is impossible to monitor their end-use. It is preferred to introduce CBDC in order to track end-to-end virtual currency usage. The article sheds light on what digital currency is, how it differs from cryptocurrencies, why it has had such a surge in popularity recently, as well as the problems and risks that come with using it.

Introduction

Traditional banking and financial systems are transforming across the globe owing to the effects of the Covid-19 epidemic, shifting trading dynamics, and pervasive technological advancements. Post demonetisation in 2016 and the launch of digital India initiative, the government in India has been stressing on the use of digital space and digital money. The current Union Budget Finance Minister, Nirmala Sitharaman announced the introduction of Central Bank Digital Currency which is popularly known as “CBDC”. The Reserve Bank of India (RBI) is seriously considering introducing its own Central Bank Digital Currency (CBDC) this fiscal year, which will first be restricted to usage by wholesale businesses only. Given this, the RBI submitted a proposal to the central government in October 2021 to alter the RBI Act, 1934 to expand the definition of "banknote" to encompass currency in digital form. The central bank stated in its annual report (published in May 2022) that it was considering the benefits and pitfalls of introducing CBDC in India while moving gradually through the phases of proof-of-concept, pilots, and launch. "The Reserve Bank is engaged in introducing a central bank digital currency (CBDC) in India. The design of CBDC needs to be in conformity with the stated objectives of monetary policy, financial stability and efficient operations of currency and payment systems,” the RBI said in its report. With the declaration of CBDC in the Union Budget and subsequent enactment of the Finance Bill containing the necessary amendments to the RBI Act, 1934 the necessary legal foundation for CBDC's establishment has been laid and therefore the RBI is now responsible for ensuring that the digital currency that will be introduced achieves the goals that have been set for its introduction.

What is a central bank digital currency or CBDC?

According to RBI, "A CBDC is a legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different". In other words, digital currency is a digitised or virtual version of domestic currency that is equal to physical cash. CBDC, though a virtual or digital currency, differs from private cryptocurrencies in that it satisfies a key requirement of the definition of a currency being backed and issued by a central bank. CBDC is the same as money issued by a central bank, except it doesn't come in paper form (or polymer). It is a sovereign currency in electronic form and would appear as a liability (currency in circulation) on the balance sheet of the central bank of India.                     

Hence, Central bank digital currency is ….

• the legal tender
• issued and governed by the central bank
• is in digital form
• same as a fiat currency
• will be based on blockchain technology

  Although CBDC is a virtual or digital currency, it cannot be compared to the private virtual currencies or cryptocurrencies that have exploded over the past ten years. It is also essential to understand the difference between CBDC and cryptocurrencies. Not all digital currencies are cryptocurrencies, but all cryptocurrencies are digital currencies. Digital currency may not be encrypted, but cryptocurrency operates in an encrypted format through blockchain technology. Since there is no issuer, private virtual currencies do not represent any person's debt or liabilities.

What are the drivers of CBDC?

The majority of central banks throughout the world are experimenting with digital currency to combat the current wave of virtual currencies or cryptocurrencies. Private or decentralised money is not something that the central bank can regulate, and it also poses a challenge to the sovereignty of their national currency as the public is responsible for both the creation and upkeep of these virtual currencies. The central bank can prevent these misdeeds by regulating the digital currency. That is why most central banks, including those in Sweden, China, and the EU, are developing their own CBDC. Another issue with cryptocurrencies is that their value is purely based on speculations because they are not linked to any assets or currencies (demand and supply). As a result, the value of cryptocurrencies like bitcoin has fluctuated greatly. As CBDCs are issued by central banks, their demand and supply can be regulated and they can be used as a monitoring tool. CBDC may be able to provide better resilience, higher safety, greater availability, and lower prices than private forms of digital money if they are wisely structured. A CBDC may possibly be a crucial step toward financial inclusion. Although the availability of payment services has increased recently, only some have access to them. People with low incomes and those who live in rural areas still need help accepting digital payments. Payments across borders, especially for small-value transfers like remittances, can be difficult and expensive for domestic retail payment systems. CBDCs can aid in extending the public's access to public funds. The adoption of digital payments can be accelerated by central banks with the support of CBDCs, especially when the market and profit opportunities are insufficient to spur private sector innovation and handle the associated risks. Digital forms' ease of use and security is another benefit favouring CBDC. It is always more convenient and secure to carry digital money than carrying actual cash. It combines the conventional approach with the innovative approach. CBDC can gradually enact a cultural shift in favour of virtual money by reducing the costs associated with currency management. CBDC is designed to combine the security and convenience of digital cash with the reserve-backed money circulation of the traditional banking system.

Why has CBDC suddenly gained popularity in India?

The Reserve Bank of India (RBI) has been studying the possibility of introducing a central bank digital currency (CBDC) since at least 2013. It is unclear what the benefits would be to the RBI in issuing a CBDC. Still, it is being argued that it would allow for better control and oversight of the domestic money supply and financial stability. Several nations are developing CBDCs, and a few have even implemented them. As of August 2022, 11 countries(The Bahamas, Nigeria, Jamaica and eight countries of the Eastern Caribbean Union ) have already launched their digital currencies. Many including China are still testing and developing their CBDCs. The drivers for CBDC in India are many and varied. But, at its core, the need for CBDC stems from the desire for a more efficient and inclusive monetary system. The current monetary system in India is based on paper currency, which is subject to wear and tear, as well as counterfeiting. This means that there are significant costs associated with its production and distribution. In addition, paper currency is also inefficient in terms of storage and transport. This will also ensure that India remains at the forefront of innovation in the global financial system and does not fall behind other countries in terms of implementing new technologies.

In addition, CBDC would also allow for greater inclusion by expanding access of financial services to those who are currently excluded from the formal banking system. At present, there are around 1.2 billion people in India who do not have access to formal banking services. This means they miss out on opportunities to save and build financial resilience. A CBDC could address this by providing a safe and convenient way for people to store and use money without going through a bank.

CBDC, or the digital rupee, can be used in many real-world applications, such as programmable payments for subsidies and quicker lending and payments by financial institutions. A practical transition to a cashless economy may occur soon, and this might strengthen the government's emphasis on cashless transactions. Cross-border remittances may gain from increased use of CBDC as an environment for interoperability may be established, allowing for faster real-time transmission.

Finally, CBDC could help to reduce the cost of printing and circulating paper currency. CBDC would mitigate these costs by being digital and therefore more secure and less expensive to produce. In addition, banks charge high fees for certain services, such as international money transfers; with CBDCs, these fees could be reduced or may not even be required, as there would be no need for banks to process the transactions. CBDCs might also make it possible for payment systems to be more quick, easy and global. It is possible for an Indian importer to directly pay a foreign exporter in digital dollars without using a middleman; the transaction would be final.

How CBDC differs from other digital mechanisms, and why is it considered better?

There are numerous ways and platforms available for digital payments. However, a CBDC or Central Bank Digital Currency has some advantages over other alternatives, and these are:

1. As the government's central bank backs CBDC, it is regarded as being more stable than cryptocurrencies, which may be very volatile.

2. Large transactions can be made using a CBDC without worrying about the cap imposed by cryptocurrency.

3. A CBDC is faster and more efficient than other digital payment methods, such as blockchain-based payments.

4. As it would be harder to launder money via a CBDC than other digital payment systems, a CBDC can assist in reducing crime.

Digital currency will be different from Unified Payments Interface (UPI), which is a system that powers multiple bank accounts into a single mobile application. The underlying currency or cash is used to transmit funds through payment channels like UPI, so UPI payments are currently made with the digital equivalent of physical cash notes. This means that each rupee moved through UPI is backed by actual money, whereas in the case of CBDC, the underlying payment method will be the Digital Rupee, and there won't be a need to back it by real money because it will be legal tender in and of itself.

The digital rupee will be run by RBI rather by bank intermediates, as is the case with UPI, where each bank has a different UPI handler, which is the other point of distinction. Furthermore, Digital Rupee transactions will be instantly settled. Currently, UPI payments rely on the settlement of the transacting banks with the RBI; however, since Digital Rupee will be transacting straight from the RBI, it will be settled immediately.

What are the risks of a CBDC?

The Indian government is in the process of issuing CBDC but there are risks associated with such a move. For example, if a CBDC is poorly designed, it could lead to increased cyber security risks or be subject to fraud and other types of crime. One of the key risks is the potential for CBDC to be used for money laundering and terrorist financing. Another risk is that CBDC could undermine the existing financial system, which is already struggling to cope with high levels of non-performing loans. There is also the possibility that CBDC could lead to inflation if it is not managed properly.

Banks in India have also raised their disintermediation concerns over RBI’s digital currency plans. Banks worry about the potential long-term effects if the central bank takes on the role of keeping and dispersing digital currency, eliminating banks as an intermediary between customers and the RBI. This could lead to a decrease in deposits, and if banks start to lose deposits over time, it will limit their ability to extend credit. Additionally, when banks lose sizable amounts of low-cost transaction deposits, their interest margin may be put under pressure, raising the cost of loan. RBI has taken all these concerns into perspective and has decided to move slowly and steadily, wherein the initial focus area is wholesale CBDC. Wholesale CBDCs means it will be used to facilitate payment between RBI and commercial banks and entities that hold accounts with central banks. Due to its potential to make current wholesale financial systems more efficient, accessible, and secure, the wholesale CBDC is thought to be the most well-liked concept among central banks.

Privacy concerns are yet another issue. The majority of CBDCs will be created such that the central banks can track the spending, unlike completely anonymous cash. The increased risk to user privacy must be addressed as well, considering that the central bank would have access to a lot of information about user transactions. This has significant ramifications since digital currency users will not be entitled to the same amount of privacy and anonymity as those who trade with cash.

As the world progresses, technology intervention is leading to the digitisation of services as well as ways of working across industries. We are now at the cusp of entering a new phase of banking, with the digitisation of currency being the first step in this evolution as more innovative payment methods are being developed. Central banks have now started to develop their own digital currencies, also called central bank digital currencies or CBDCs. By the beginning of 2023, India's official digital currency, which would resemble any of the present private company-run electronic wallets, is most likely to be introduced. The CBDC will be a digital currency backed by the government. The digital rupee is a Central Bank Digital Currency to be issued by the RBI and will be backed by the reserves held by the central bank. The digital rupee will be similar to other online or virtual currencies, but it will have some unique features. It will be designed to reduce the cost of printing and circulating currency notes and to promote financial inclusion. The CBDC can benefit consumers over conventional payment methods in terms of liquidity, scalability, adoption, ease of transactions with anonymity, and quicker settlement. With the assistance of the government-provided infrastructure, the adoption of CBDC will grow, enhance and make it simpler for consumers to use. Similar to how UPI made digital cash more user-friendly, this advancement will increase people's access to digital currencies.

Explained Desk (2022): “CBDC, The ‘Digital Rupee’ that RBI could Introduce this year, and How it will Help,” The Indian Express. https://indianexpress.com/article/explained/explained-economics/cbdc-the-digital-rupee-that-rbi-could-introduce-this-year-8105208/

Mehrotra, S (2022): “All you need to know the RBI Central Bank Digital Currency or digital rupee—what is the ‘digital rupee’?,” The Economic Times. https://economictimes.indiatimes.com/wealth/save/all-you-need-to-know-the-rbi-central-bank-digital-currency-or-digital-rupee/budget-hinted-at-a-cashless-economy/slideshow/89408995.cms

ENS Economic Bureau (2021): “RBI for Widening Scope of ‘Bank Note’ to Include Digital Currency,” The Indian Express. https://indianexpress.com/article/business/banking-and-finance/rbi-for-widening-scope-of-bank-note-to-include-digital-currency-7648080/

Times Now (2022): “RBI mulls to launch CBDC this fiscal for wholesale businesses,” Report, TimesNow. https://www.timesnownews.com/business-economy/industry/rbi-mulls-to-launch-digital-currency-cbdc-this-fiscal-for-wholesale-businesses-report-article-93711452

Reserve Bank of India (2022): “RBI Annual Report 2021-22,” Reserve Bank of India. https://rbidocs.rbi.org.in/rdocs/AnnualReport/PDFs/0RBIAR2021226AD1119FF6674A13865C988DF70B4E1A.PDF

World Bank Group (2022): “FSI Insights on Policy Implementation No 41 Central bank Digital Currencies: A New tool in the Financial Inclusion Toolkit?,” World Bank. https://www.bis.org/fsi/publ/insights41.pdf

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Understanding the impact of digital rupee.

Summary: With the launch of digital currency (e-Rupee) by RBI, India is expected to witness a substantial growth in the digitisation of money and take a step further towards facilitating a cashless economy.

With the pilot launch of Central Bank Digital Currency, India has taken a significant step towards digitising its financial ecosystem. Central Bank Digital Currency (CBDC) is the electronic version of the nation’s official currency and is issued by respective country's central bank. In India, the RBI (Reserve Bank of India) will issue this legal tender, also known as the digital rupee.

A number of reputable banks, including  IDFC FIRST Bank , have been entrusted by the RBI to work on this pilot project, which aims to research and analyse CBDC’s impact on the economy, risks, benefits, and implementation methods.

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How to register for cbdc   .

If you are an IDFC FIRST Bank savings account holder looking to register for the  CBDC  pilot project, the bank will send you an SMS on your registered mobile number or email on your registered email address, which will include a link to the e₹ (Digital Rupee) app.

Click on the link to download, and follow the step-by-step guide below to complete the sign-up/ registration process:

• Click on start registration after reading and accepting the Terms & Conditions 
• Verify the SIM card for the registered mobile number
• Click on Set App PIN and authenticate with your device password (PIN, Face Unlock, or Fingerprint) 
• Enter your name in the field provided and click on Choose Wallet 
• Enter your PIN in the first input field. Confirm your PIN in the second input field. Click on the "tick" button on numpad to proceed
• "Wallet Successfully Created" will be displayed on your screen
• Next, click on View Wallet Address, select Wallet, and then select "Link IDFC FIRST Bank Account"
• Click on Continue to allow the app to fetch existing IDFC FIRST Bank accounts linked to the registered mobile number
• Select the account you would like to connect with the wallet
• Enter the last 6 digits and the expiry date of your Debit Card 
• A "Bank Account Linked Successfully" message will appear, indicating that the sign-up/registration process is complete 
• You can now use e₹ (Digital Rupee) and enjoy CBDC's benefits

Once you have successfully registered for the CBDC pilot project, you can effectively improve efficiency and accessibility in handling your payments.

To deregister from the digital wallet, follow the below-mentioned steps:  

• Open the digital wallet and click on "Settings" 
• Choose "Deregister Wallet"
• You will receive a PIN to verify the same
• Once the PIN is entered and submitted, your wallet will be deregistered 
• Do note, you will be prompted to unload any unspent balance in the wallet before deregistering after wallet PIN verification.

How to use digital rupee in India?  

For using CBDC, the first step would involve understanding how to convert existing funds from your bank account into digital rupees. Get started by completing the registration for your e-rupee wallet. Once you have successfully registered with IDFC FIRST Bank’s digital rupee app, the bank will send you a notification via SMS regarding your selection for the Closed User Group (CUG). You can then start loading money in your e-wallet from your linked bank account or from any UPI app. After this, you can start completing transactions with your digital rupee wallet.

You would now be able to use the QR codes displayed at shops/malls and engage in both P2P (person-to-person) and P2M (person-to-merchant) transactions. Since CBDCs are simply a digital version of the prevailing money distributed through banks, the e-rupee will have the same denominations as followed by paper currency . Apart from financial transactions, CBDCs can be converted into other forms of money such as bank deposits. However, do note that funds stored in the digital wallet would not be able to earn any interest  .

In Conclusion  

Once launched for the wider public, CBDC will complement physical currency notes and offer another mode of digital payment. Backed by the central bank, the CBDC in India will not only be safe but will also be instrumental in bolstering India's economy and improving financial inclusion. Its other benefits for users and the government includes faster payments, decreased money management cost, etc., and it will also help the nation achieve a cashless economy.

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

Disclaimer:

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.

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An Essay On ‘e-RUPI – India’s First Digital Currency’

e-RUPI: Prime Minister Narendra Modi launched the e-RUPI on August 2. It is India’s first digital currency. It is a cash and contact less payment mode. Now let’s read an essay on e-RUPI.

What is e-RUPI ?

India’s first digital currency is e-RUPI. Prime Minister Shri Narendra Modi launched digital payment solution e-RUPI on August 2, 2022. It is a cash and contact less payment mode. Digital rupee will be an alternative option to cash payments. That is, instead of paying cash, payment can be made in this digital rupee. National Payments Corporation of India (NPCI) has developed e-RUPI with their UPI service. However, the Department of Economic Services, Ministry of Health and Family Welfare and National Health Organization have helped in this regard.

It is based on QR code and SMS string which works as an e-voucher. Under this service, the user will neither need a card, digital payment app nor internet banking access to make payments. The RBI also believes that the Central Bank Digital Currency (CBDC) should also develop an offline mode in which transactions can be made with digital rupees. This will enable more and more people to use digital currency. It is similar to paper currency, which has sovereign value. The value of the digital currency will also be equal to the current currency and it will be accepted in the same way. CBDC will appear as a liability in the balance sheet of the central bank.

What are the benefits of e-RUPI ?

It is being said that the e-RUPI platform can be used in many ways. It can help in many social welfare schemes. Mother and child welfare schemes, TB eradication projects will be useful in providing drug and nutritious food support. Ayushman Bharat can prove helpful in schemes like Pradhan Mantri Jan Arogya Yojana, Fertilizer Subsidy.

According to the government statement, the welfare of employees can be done using this digital voucher in the private sector as well. Apart from this, e-RUPI can also be used for various social welfare activities carried out by corporate offices.This digital payment solution aims to make online payments easier and safer.

Prime Minister Modi had also informed about some of its benefits through his official Twitter account. In the tweet, he said that e-RUPI will be a cashless and contactless digital payment service. This service will digitally connect sponsors and beneficiaries. It will also ensure leak-proof delivery of various welfare services.

Why was e-RUPI launched in the country?

According to RBI’s concept paper, RBI wants to reduce the huge cost of managing physical cash in the country. Think of it as RBI now wants to reduce the cost of printing, circulating and distributing the notes. RBI wants to increase the efficiency of the payment system and also wants to innovate in it. This will enable new approaches in the cross-border payments space. Digital currency will be a virtual currency that is free of any kind of risk and people will be able to use it with full confidence. The digital currency will also work in areas where there is no electricity or mobile network thanks to its offline feature.

A survey found that 85 percent of Indian villagers use mobile phones. According to the 2019 report, about 277 million mobile phone users are rural, on the other hand, 227 million users live in cities. It is expected that by 2023 everyone will be aware of e-RUPI. Only a mobile number is required for e-rupees exchange. No need to provide Aadhaar number or bank account details separately.

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