e-rupee and UPI:Shaktikanta Das, governor of the Reserve Bank of India (RBI), sought to highlight the fundamental distinctions between the Central Bank Digital Currency (CBDC) and Unified Payments Interface (UPI) on December 7. He said that unlike UPI transactions, e-rupee transactions will not include any intermediaries.
e-rupee transactions will not include any intermediaries.
CBDC, sometimes known as the “e-rupee,” is the digital equivalent of fiat money, whereas UPI is a platform for facilitating banking transactions.
The remarks made by Das, who was speaking to the media following the monetary presser, take on significance within the backdrop of the controversy over the distinction between CBDC and UPI. After doing the same for wholesale clients, the RBI started the retail CBDC, or e-R, experiment on December 1 as the first step toward scaling up the usage.
Customers’ willingness to use e-Ruee has been questioned given the rise of UPI as a preferred digital payment option.
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Das said “When I use a UPI app, my bank account is debited and money is sent to the recipient’s bank. “In paper currency, you may draw Rs 1,000 from the bank, keep it in your wallet, and spend it at a shop,”
He further stated “Any UPI transaction includes the intermediation of the bank.”
On digital currency Das clarified “In a manner similar to CBDC, you will draw the virtual money and save it in your mobile wallet. When you pay at a store or to someone else, the money is transferred from your wallet to their wallet. The bank does not route or mediate transactions”
CBDC i.e. e –rupee is much like cash facilitates money transfer between two private entites
Acording to deputy governor T Rabi Sankar, CBDC can facilitate direct money transfers between two private entities, including people and businesses, much like cash. While just two bank accounts can be moved while using UPI.
The number of additional use cases for the CBDC also depends on how innovatively our startup and fintech environment develops and what types of payment channels it opens up. We will establish the foundational framework, after which the private sector can innovate, according to Sankar.
According to numerous experts in the payments sector, if UPI transactions, which are currently free, start to charge, CBDC may end up being the only free payment method left.
Anonymity in e-rupee transactions
Das also sorts to address worries regarding potential negative effects of CBDC transaction secrecy.
The governor said, “Why should we create a fear psychosis when you pay in currency notes to another person, no one can find out because that information is not available to the bank. Even in the case of CBDC, you cannot find out because the information is not available to the bank. It goes from my mobile to another mobile.
According to Das, there is no distinction between paper money and digital money in the eyes of the law. He claimed that CBDC will be subject to the same income tax regulations that apply to actual currency.
Anonymity is a fundamental component of currency, therefore we’ll have to ensure it, said Sankar. However, the specifics of what will happen will depend on how things develop.
The RBI had stated when launching the retail CBDC pilot that the implementation would take place in stages in collaboration with a select banks and in some locations before being scaled up.
Starting with the four cities of Mumbai, New Delhi, Bengaluru, and Bhubaneswar, the pilot is being put into practise among a select set of consumers and business owners.
It was stated that it would be expanded in the following phase to include Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla.
The pilot includes State Bank of India, ICICI Bank, Yes Bank, and IDFC First. The RBI said that four additional banks—Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank—would eventually join.
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