Popularize the e-rupee even at the cost of UPI

Source: The post is based on the article “Popularize the e-rupee even at the cost of UPI” published in the Livemint on 3rd January 2023.

Syllabus: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources.

Relevance: About the promoting e-rupee and concerns associated with the Unified Payments Interface (UPI).

News: Recently, the supreme court upheld the demonetization done by the government in 2016. The government plans to improve the rupee digitisation. But, India’s cash intensity remains roughly on the same incline as it was earlier.

About the success of Unified Payments Interface (UPI)

The UPI has been a spectacular success since its 2016 launch. It is designed for instant transfers between bank accounts done via mobile phones.

According to the National Payments Corporation of India (NPCI), UPI operator, UPI processed more than 74 billion transactions in 2022. This is up 90% over 2021. It is worth almost ₹126 trillion, a 76% leap from 2021.

With 381 banks in the loop, net-linked handsets everywhere and UPI adoption now so wide.

What are the concerns associated with the UPI?

The government levies no user fee for UPI transactions. Public funds are used in strengthening UPI and funding bank transfers done by UPI. The government justifies that it’s a “digital public good with immense convenience for the public and productivity gains for the economy.”

Why India should promote RBI’s retail e-rupee instead of UPI?

This is because a) The digital rupee will better serve the cause of economic stability than an over-reliance on banks that square off transfers among themselves, b) With increasing UPI Payments, the public money spent for strengthening it will also increase. But this is not the case with the e-rupee, c) The mass usage of the e-rupee would involve the circulation of money that’s a direct liability of the central bank. On the other hand, UPI relies more on money in bank accounts.