New Delhi: The central bank has introduced the digital rupee, also known as Central Bank Digital Currency (CBDC), which are digital forms of currency notes. It shares all the benefits of other digital payment systems for transactions.
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The RBI’s move to position India ahead in the virtual currency space is the main reason for introducing the digital rupee. Both wholesale and retail customers will have continuous access to the payment system, and the best part is, that you don’t need to open a bank account to use digital rupee.
What is e-Rupee?
The e-rupee is a digital token that holds the status of legal tender, allowing users to conduct transactions through a digital wallet provided by partner banks. This wallet can be stored on mobile phones or devices.
Think of e-Rupee like traditional bank notes or coins – if you have them, you can use them just like regular currency. You can store your e-Rupee in your bank’s e-Rupee app, and the digital wallet works similarly to a physical wallet but without the need for any paper transactions.
When it comes to transactions, e-Rupee offers a paperless experience. You can make electronic transactions anonymously by obtaining the phone number or QR code of the sender/receiver, or you have the option to use an account for your e-transactions. This brings convenience and modernity to the way we handle money.
Features of Digital Rupee:
Central Bank Digital Currency (CBDC) is a type of currency issued by central banks in line with their monetary policies. On the central bank’s balance sheet, it appears as a liability.
Everyone, including individuals, businesses, and government organisations, is required to acknowledge CBDC as a legitimate and accepted form of payment. It is considered legal tender and a secure way to store money.
CBDC can be easily converted into physical cash and funds from commercial banks. The beauty of CBDC is that you don’t need a bank account to hold it, as it is recognised as interchangeable legal money.
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One of the expected benefits of CBDC is a potential reduction in the cost of issuing currency and transaction expenses. This move towards digital currency is aimed at making financial transactions more efficient and cost-effective.
How Is e-Rupee Different From Cryptocurrency?
As per information from hdfc.com, a cryptocurrency is an asset without a central authority, and transactions rely on a group of users for settlement. In contrast, e-Rupee ensures that the central bank takes on the responsibility of settling transactions.
Moreover, e-Rupee is designed to have a stable value similar to the traditional rupee. This is different from cryptocurrencies, which can experience significant and unpredictable value fluctuations. In simple terms, while e-Rupee offers stability, some cryptocurrencies can be quite volatile in terms of their value.
FAQs
Can the Digital Rupee be converted to cash?
Ans. Digital Rupee cannot be exchanged for cash, only bank deposits will be used to issue e-Rupee.
What is the difference between e-Rupee and UPI?
Ans. e-Rupee is a digital currency that acts as a legal tender for digital transactions. It allows people to make digital payments and purchases securely whereas UPI is a platform that enables digital transactions to take place.
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Where can I buy a digital rupee?
Ans. You can buy digital rupees from the four banks that the RBI has licensed. They are the State Bank of India, Yes Bank, ICICI Bank, and IDFC First Bank.
