How Does Digital Rupee Work
21 April, 2023
In December 2022, the Reserve Bank of India (RBI) launched its own digital currency, Digital Rupee (e₹), that can be regulated and monitored, so that all the benefits of the blockchain are passed on to Indians around the country. How will e₹ work? Here's how.
What is e₹?
e₹ is legal tender issued by the RBI that will take the electronic form of the existing paper currency. Also known as Central Bank Digital Currency (CBDC), the RBI will issue e₹ that can be used in place of paper cash to transfer money between peers and make merchant payments. Eventually, e₹ may be used for cross-border transactions as well.
How does e₹ work?
Using e₹ is like using cash, except your cash will be in the electronic token form stored in your digital wallet. Here's how e₹ work:
Issuing e₹
The RBI will issue electronic tokens that can be exchanged one-to-one. e₹ will have the same denominations that are currently circulating in the country.
The RBI will distribute the required number of tokens to intermediaries called Token Service Providers (TSPs). The banks will acquire the tokens from RBI via the TSP merchants. The issuance of Digital Rupee will be processed online. Here, the RBI does not have to bear operational costs like printing, storing or transporting physical cash.Acquiring e₹
The participating banks will make the CBDC tokens available to their customers through a digital wallet. You can withdraw digital tokens from the bank in the same way you would withdraw cash. You can convert your cash holdings to preferred e₹ using the Unified Payment Interface (UPI) payment gateway. Some banks may allow instant transfer from the bank account to the digital wallet.
The RBI ensures that your tokens are secure by implementing security methods like cryptography and quantum computing-resistance systems. Also, each token will have a unique token number to prevent counterfeiting of tokens. This will also allow the wallet provider to restore the total value of digital tokens in case you lose your device.
Using e₹
Now that you know how e₹ operates, let us understand how you can make transactions:
Person to Person (P2P): You can transfer money to another person's digital wallet by using the recipient's mobile number or QR code. You need to enter the amount or select the equivalent denominations available in your e₹ wallet and hit send. Your funds will be transferred to the recipient in real-time.
Person to Merchant (P2M): You can scan the QR code displayed by merchants at their business establishments. Select the denominations or enter the amount. Approve the payment and share the transaction ID with the merchant.
Unloading the digital wallet: You can send money from your digital wallet to your linked bank account. In your digital wallet, select 'Unload' or other suitable options. Select the bank account and amount you need to credit.
Once e₹ becomes mainstream, you can enjoy benefits like truly cashless payments, speedy fund transfers and increased digital security. Needless to say, this regulated cryptocurrency will help the Government efficiently manage money in the country and improve financial inclusion.
Click here to download the app from the Google Play store.
Click here to know more about where to use the e₹ currency.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
