What is e Rupee and How It Works? New Digital Era 2023

Hi friends! Today in this article we will discuss all the possible questions relating to e-Rupee which is being launched by Indian Government viz., what is e rupee and how it works, why was e rupee launched in India, difference between e rupee and upi, interoperability of e-rupee and UPI and much more. So, let’s go!

As technology is developing with time, the Indian Government is also leaving no stone unturned in using it. UPI was launched earlier in 2016 and now the digital currency which is called e-Rupee.

E-Rupee is also known as Digital Rupee or CBDC i.e. Central Bank Digital Currency. Therefore, whenever you hear e-Rupee, Digital Rupee or CBDC, please do not get confused. These all are the same.

What is e Rupee and How It Works
What is e Rupee and How It Works

What is e Rupee and How It Works?

E-Rupee or CBDC (i.e. Central Bank Digital Currency) is a digitized version of physical currency in India. Just as you can use physical currency, you can also use e-Rupee in the same way. This also includes bank notes and coins. 

This is the legal tender as the physical currency is. It will be accepted as payment and a secure store of value, and it will be exchangeable on an equal footing with current currencies.

e-Rupee is completely different from cryptocurrencies. Cryptocurrencies use public blockchain networks, these are decentralized and are not controlled by any one entity.

e-Rupee uses a private blockchain network which is controlled by the Reserve Bank of India (RBI). 

In India, cryptocurrencies are not considered legal tender, whereas e-Rupee is a legal tender controlled by RBI.

Now, Let Us Know How e-Rupee or Digital Rupee Works: 

Suppose you want to give 100 rupees to your friend, you will take it out from your wallet and give it to your friend. Similarly, like physical rupee or coin, this e-Rupee will remain in your digital wallet which you can transfer to your friend (without the intervention of a Bank) which will be reflected in his digital wallet.

You can add e-Rupee from your bank to your digital wallet just like physical rupees, you can also get your salary in e-Rupee. This means that you can use e-Rupee [CBDC] in whatever way you transact physical currency.

It is also being said by the Indian government that there is no need for the Internet for e-Rupee or digital rupee transactions and it can also be done offline. This will be considered a huge achievement because even now a large number of villages in India lack Internet facilities or have poor Internet connectivity.

Who Launched e Rupee in India?

The Reserve Bank of India (RBI) launched e-Rupee / Digital Rupee / CBDC in India from November 1, 2022 and it is being implemented in several phases.

On December 1, 2022, the retail digital rupee (e-Rupee) pilot program was introduced in Mumbai, New Delhi, Bengaluru, and Bhubaneswar cities of India. 

Other cities viz. Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla will also be included in its extension. When necessary, the pilot’s scope may be progressively increased to include additional banks, users, and locations.

The pilot project involves following nine banks:

  • Union Bank of India
  • Bank of Baroda
  • State Bank of India
  • Yes Bank
  • Kotak Mahindra Bank
  • IDFC First Bank
  • HDFC Bank
  • ICICI Bank
  • HSBC

Not only in India, digital currencies have already been introduced in the Bahamas, Nigeria, Dominica, Montserrat, Antigua and Barbuda, Saint Lucia, St. Kitts and Nevis, and St. Vincent and the Grenadines.

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Why Was e Rupee Launched in India?

As a sovereign currency, e-Rupee/Digital Rupee/CBDC has the distinct benefits of central bank money, including integrity, finality of settlement, safety, and trust. 

Among other things, the primary drivers behind investigating the issuing of e-Rupee or CBDC in India include the cost cutting i.e., decrease in the operational expenses associated with printing, distributing and managing cash in a physical manner.

In addition to the above, other factors are for encouraging financial inclusion, introducing resilience, efficiency, and enhancing the settlement system’s efficiency, encouraging innovation in the payments system, and innovation in the field of cross-border payments and giving the general public access to uses that any private Virtual currencies offer the same benefits without the risk.

In remote areas where electricity, Internet or a mobile network is unavailable, using CBDC’s offline feature would be advantageous for availability and resilience. 

The public will benefit from virtual currencies using e-Rupee (CBDC) which will also guarantee consumer protection by avoiding social and financial effects of private virtual cryptocurrencies.

How to use e-Rupee?

The first step in using CBDC would be learning how to convert funds that are currently in your bank account into digital rupees. 

Start by finishing your e-rupee wallet’s registration. After completing the registration process for your bank’s e-wallet, you can begin adding funds to it using any UPI app or your connected bank account. Following that, you can begin using your digital rupee wallet to complete transactions.

You would now be able to make P2P (person-to-person) and P2M (person-to-merchant) transactions by using the QR codes that are displayed at stores and malls. The e-rupee will have the same denominations as paper money because CBDCs are just a digital representation of the actual money that is issued by banks.

In addition to being used for financial transactions, CBDCs can be converted into other forms of funds, like bank deposits, etc. However, money kept in the digital wallet is not eligible to accrue interest.

What is e Rupee and How It Works
What is e Rupee and How It Works

Impact of e Rupee on Indian Economy:

  • Blockchain technology will improve the digital rupee’s efficiency and transparency.
  • Blockchain will also make ledger maintenance and real-time tracking possible. 
  • Both wholesale and retail clients will have round-the-clock access to the payment system. 
  • Indian consumers can make payments directly to the seller.
  • Reduced cost of transactions.
  • Settlements of accounts in real time. 
  • To conduct business using a digital rupee or e-Rupee, you are not required to open a bank account.
  • Quick international transactions.
  • No chance of volatility because the RBI will support it.
  • In contrast to banknotes, the digital rupee will always be portable, etc.
  • By promoting digital transactions, e-Rupee can lower the amount of black money and increase economic transparency.

Difference Between e Rupee and UPI:

Let’s understand the difference between e-Rupee and UPI, with an example. 

Take the example above in which you give 100 rupees to your friend. Assume that you are using UPI for this transaction. UPI will be connected to your bank account, your bank will deduct 100 rupees from your bank account and deposit it in your friend’s bank account through UPI. Therefore, there is intervention of UPI and Bank in the transaction through UPI.

 On the other hand, there is no intervention of UPI or bank in the transaction through e-Rupees or CBDC. This is just like you give physical money from your wallet to your friend and UPI or Bank does not come in between.

UPI, Net Banking, Mobile Banking etc. are only modes of transaction of your money through Bank, but e-Rupee /CBDC /Digital Rupee is the digitized version of physical money and it is legal tender itself.

Reserve Bank of India (RBI) is in charge of creating and overseeing digital rupees. On the other hand, UPI, a decentralized platform used by multiple banks and payment service providers, has been developed by NPCI (National Payment Corporation of India).

Digital Rupee or e-Rupee operates on a regulated infrastructure that guarantees control and security, in contrast to UPI, which provides users with flexibility and choice on a decentralized platform.

Interoperability of e-Rupee and UPI:

Now, let’s see the effect of convergence of e-Rupee and UPI.

The Reserve Bank of India’s Deputy Governor, T Rabi Sankar, announced earlier this year an exciting development: the bank is actively working to allow CBDC transactions through the UPI channels.

UPI QR codes will be used to enable this interoperability, simulating the well-known procedure of traditional payment methods.

Consequently, businesses that presently take credit-to-bank or bank-to-bank UPI payments will accept digital rupee payments through customers’ CBDC wallets by simply scanning the UPI QR code. 

The union of UPI and e-Rupee (CBDC) has the potential to completely redefine how consumers and merchants conduct business.

What is e Rupee and How It Works
What is e Rupee and How It Works


Advantages of e Rupee:

  • Quicker Payment Method:

Compared to traditional payment methods like wire transfers or automated clearing houses, which take days for financial institutions to validate a transaction, digital currency or e-Rupee allows you to make payments much more quickly.

  • Reduced Cost International Transfers:

International transactions can get very costly at times. Transferring money between countries comes with expensive fees, especially when currency conversions are involved. This market could be disrupted by digital assets because they would make transactions quick and affordable. 

  • Availability Round the Clock (24 x 7):

The same speed applies to digital currency transactions every day of the week, 24 hours a day. On the other hand, because banks are closed on weekends and during non-business hours and cannot verify transactions, existing money transfers often take longer.

  • No Need of Manufacturing Facility:

There are several prerequisites for physical currencies, including the construction of manufacturing facilities. In contrast, there is no such expense associated with digital currencies or e-Rupees. Digital currencies are also resistant to physical flaws or soiling that affect physical currency.

Disadvantages of e Rupee:

  • Expensive Deal:

Implementation of e-Rupee or CBDC may require a substantial amount of electricity; the cost may increase with the volume of transactions. 

  • Sharp Learning Curve:

The user must put in effort to learn basic skills such as opening a digital wallet and safely storing digital assets in order to use digital currencies. Even some people in remote areas do not know how to operate a Smartphone. Simplifying the system is necessary for digital currencies to be widely adopted.

  • Cybersecurity Issues:

Because there are less safe ways to store digital currency, people are always concerned about cybersecurity and potential threats.  Cyberattacks are probably becoming more frequent, and they pose a risk of virtual theft to users of e-Rupee or CBDC. Government should also see this issue carefully and bring a robust solution.


Thus, we have seen how India has entered the world of digital currency by launching e-Rupee. Now, there is a need to implement it effectively and completely which is the biggest challenge. However, certainly the government will find a way after overcoming all the difficulties.

That’s all my friends for now! I hope this article will be valuable. I will love your comments and feedback. You can reach me through the emails given below.


Abhijit Ranjan



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