Recently, everyone would have noticed that something called E-Rupee was in the news. You may have wondered, what is this E-Rupee? How does it work?. In this post, I am going to try to give the answers to this question is simple words that are easy to understand.
What is E-Rupee?
In simple terms, the E-Rupee is a digitalised version of INR (Indian Rupee). It is a legal tender issued by the central bank (RBI) but in digital form. The digital rupee uses blockchain distributed-ledger technology.
Read more about blockchain here - What's the deal with Blockchain?
The denominations of the E-Rupee are the same as the physical ones i.e.-
- 50 Paise
- 1 Re.
- 2 Rs.
- 5 Rs.
- 10 Rs.
- 20 Rs.
- 50 Rs.
- 100 Rs.
- 200 Rs.
- 500 Rs.
- 2000 Rs.
How is E-Rupee different from UPI?
In UPI transactions, you place a request with your bank and the amount is then deducted from your account and transferred to the beneficiary's account. Meanwhile, in the case of E-Rupee, it is like handing cash over to another person digitally. The money is never 'in transit' and there is no need of inter-bank settlement (the transfer of money from the sender's bank to the beneficiary's bank). This might seem quite confusing but actually is quite simple. You transfer some E-Rupees from your account to your digital wallet. This service is provided by the bank. Then for sending any money, your bank doen't have to release the money and transfer it to the account. The money directly goes from your wallet to another person's wallet. The beneficiary can either keep the money in his/her E-Rupee wallet or transfer it to the bank account.
How can the E-Rupee be used?
The E-Rupee service is currently in the trial phase and will cover only certain consumers and business with only certain cities and banks involved. When it is released for the public, the service will be accessable through E-Rupee apps that will be launched by the bank. For example, Yes Bank has already launched its app 'YES BANK Digital Rupee'.
Why was the E-Rupee launched?
The E-Rupee was launched for mainly 4 reasons-
- Reducing the costs related to the management of physical currency like printing, minting, transportation, storage, security, etc.
- Increasing the adoption of digital payments.
- Supporting financial inclusion through the offline feature in remote areas of India with poor connectivity.
- Providing Indians a safe digital currency without the risks of crypto-currency.
What will be the Future of E-Rupee?
The E-Rupee can revolutionise digital payments throughout India especially in the remote areas. RBI has stated that the E-Rupee will just complement the physical Rupee, not replace it. So, we will not have complete digitalisation but it will significantly help in reducing our dependance on physical money and reduce the costs.
Readers, do you think that in a few years the E-Rupee will be as widely used as UPI nowadays? What do you think will be the future of the E-Rupee? Let us know in the comments section.
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Regards,
Aarav Iyer
References:
(1) Razorpay
(2) Economic Times
(3)
Wikipedia (Fig. 1 + Fig. 2 + content)
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