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

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.