E-RUPEE (Syllabus: GS Paper 3 – Economy)

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Context: Fintech companies are eager to participate in the Indian central bank’s digital currency project by enabling their users to conduct transactions in e-rupee through the Unified Payments Interface (UPI).


E-Rupee

  • About: The e-rupee, or digital rupee, is a digital currency introduced by the Reserve Bank of India (RBI).
  • Launched: The digital rupee was introduced on a pilot basis in December 2022, initially available through select public and private banks in major cities.
  • Objectives: It aimed to provide an alternative to cryptocurrencies and enhance transaction transparency, while reducing the costs associated with traditional fiat currency production.

Key Features of e-Rupee:

  • Acceptance: Must be accepted as a medium of payment and a legal tender.
  • Store of Value: Should serve as a safe store of value for all citizens, enterprises, and government agencies.
  • Convertibility: Freely convertible against commercial bank money and cash.
  • Fungibility: Functions as a fungible legal tender without requiring a bank account.
  • Cost Efficiency: Expected to reduce the cost of issuing money and transactions.
  • Electronic Form: It exists solely in electronic form and does not involve physical currency.
  • Legal Tender: Like traditional banknotes, it is a legal tender for transactions but can only be used online.
  • Legal Tender Status: Both e-rupee and banknotes are legal tender issued by the central bank.
  • Interest Payments: Unlike bank deposits, digital rupee holdings do not earn interest from the central bank.
  • Conversion Flexibility: Bank deposits can be converted into e-rupees and vice versa, facilitating ease of use.


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