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Source: The post is based on the article “RBI announces launch of first pilot for retail digital rupee on 1 Dec” published in Livemint on 30th November 2022.
What is the News?
The Reserve Bank of India (RBI) has announced the launch of the first pilot for retail digital Rupee or e-rupee from December 1,2022.
What is digital Rupee or e-Rupee?
e-Rupee is a form of digital token that represents legal tender. Unlike cryptocurrencies, the digital Rupee is issued in the same denominations as paper currency and coins.
How will digital Rupee work?
The digital Rupee or e-Rupee will be distributed through intermediaries like banks to customers and merchants.
Users will be able to transact with e-Rupee through a digital wallet offered by the eligible banks and stored on mobile phones or devices.
The transaction in digital Rupee can happen between Person to Person(P2P) and Person to Merchant(P2M).
Users will be able to make payments through e-Rupee using QR codes displayed at merchant locations, just like online transactions are done.
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.
What are the advantages of e-rupee?
The key motivations for exploring the issuance of the digital rupee in India include reduction in operational costs involved in physical cash management, fostering financial inclusion, bringing resilience, efficiency and innovation to the payments system.
It will also add efficiency to the settlement system and boost innovation in the cross-border payments space and provide the public with uses that any private virtual currencies can provide, without the associated risks.
