In an effort to bolster financial inclusion, the Reserve Bank of India launched the central bank digital currency pilot project in 2022. Here’s how e-rupee can change the way we transact
In its annual report 2022-23, released last month, the Reserve Bank of India (RBI) said that the results of the two pilots for digital rupee (e-Rupee) or the Central Bank Digital Currency (CBDC) so far have been satisfactory and in line with expectations.
With a focus on deeper financial penetration and inclusion, the RBI last year launched a pilot project for the digital rupee in both wholesale and retail segments.
The e-Rupee or CBDC was envisaged by a high-level inter-ministerial committee in 2017 as a response to cryptocurrencies. In 2020, RBI set up a working group to give recommendations on CBDC. In late 2022, the central bank launched a pilot project for digital rupee in both the wholesale and retail segments.
According to the annual report, the currency in circulation now includes banknotes, coins, as well as digital rupee (e₹).
The banknotes comprise denominations of Rs. 2, Rs. 5, Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 200, Rs. 500, and Rs. 2,000, and coins comprise 50 paise and Re. 1, Rs. 2, Rs. 5, Rs. 10 and Rs. 20 denominations. The digital rupee (e₹-Retail) has been launched in denominations of 50 paise, Re. 1, Rs. 2, Rs. 5, Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 200, Rs. 500 and Rs. 2,000.
As of March 31, 2023, the total value of the digital rupee in circulation stood at Rs 16.39 crore, out of which Rs 5.70 crore was in the retail segment. The value of bank notes in circulations was Rs. 33,48,228 crore, while the value of coins was Rs 30,242 crore.
Here are the salient features of digital rupee and how it could transform the way we transact
WHAT IS e-RUPEE?
e-Rupee is the digital form of the Indian currency that we use. It is regulated by RBI, and thus, like the physical form of currency, it offers safety and trust. It is a legal tender and can be used for carrying out any financial transaction.
HOW IS IT BENEFICIAL?
Faster Settlement Time With 24-Hour Service Availability: These transactions are instantaneous and available 24/7, according to information on the State Bank of India website. This makes them faster than conventional transactions using physical currency.
For transferring money offline or through other online modes, there are some limitations, such as batch runs, clearing cycles in NEFT and RTGS, no transaction on weekends or other bank holidays, etc., but, with 24X7 service availability, e-Rupee is available for use at any time, and there is no waiting period for clearing settlement.
Lower Cost Of Transactions: There is a lower cost in transacting through the digital rupee. Physical cash needs storage space and it could be bothersome if it needs to be carried in large sums. Besides, there’s always the risk of theft of physical currency. Digital currency is stored in a digital wallet with the bank, and thus safer to store, and is also available at any time.
No Hassles Of Changing Soiled Notes: Cash has been a preferred mode of transaction because of being in existence for a long time and the anonymity it offers. But, physical cash is prone to getting soiled with use over time, which in turn could lead to defacements and also mutilation. In both cases, they will have to be exchanged at the bank. In case of excessive damage or disfigurement, the note could be deemed invalid.
Digital rupee does not carry these risks and is thus free from these damages.
Fake Notes Risk: Physical currency can be forged and there is always of risk of being handed over one by an unscrupulous characters. According to the RBI, the instances of fake notes of denomination of Rs. 200 and Rs. 500 have increased over 2022-23. The increased adoption of digital currency is expected to reduce the circulation of fake notes.
Quicker International Transfers: e-Rupee is expected to reduce the time and charges for international transactions.
As of now, the project is still in the pilot phase with nine participating banks. Five more banks, namely Punjab National Bank, Canara Bank, Axis Bank, Federal Bank, and IndusInd Bank are in the process of becoming part of the pilot project.