The digital rupee is still in the planning stages, and its ultimate form might alter based on the results of the RBI’s pilot trials.

After forming a working group to investigate the viability of a Central Bank Digital Currency (CBDC) in India in 2020, the Reserve Bank of India (RBI) issued a concept note on digital rupees (e-rupees) on October 7, 2022. In its 2022 Union Budget, the Government of India also announced the establishment of a CBDC. The RBI concept note states that the central bank would begin trial launches of the digital rupee in India. Here, we explain what the proposed digital rupee, as detailed in the RBI’s concept note, may entail for you. It should be noted that the digital rupee is still in the design stages, and its ultimate form may alter based on the results of the RBI”s pilot trials.

What exactly is an e-rupee (digital rupee)?

E-rupee, also known as digital rupee, is a digital form of the Indian rupee being investigated by the RBI. The RBI proposes two versions: wholesale for interbank settlement and retail for the general public. According to the RBI’s planned indirect approach, you will keep the digital rupee in a wallet with a bank or service provider.

Is it a digital currency?

digital currency ; The underlying technology of bitcoin (distributed ledger) has the potential to support sections of the digital rupee system, but the RBI has yet to make a decision on this. However, cryptocurrencies such as bitcoin and ethereum are ‘private’ in nature. The RBI, on the other hand, will issue and regulate digital rupees.

Are you able to mine it?

No. The RBI will print it. It cannot be mined in the same way that bitcoin can. This implies that the environmental and energy consumption issues that have plagued bitcoin are unlikely to affect the digital rupee.

Who will print it?

The RBI has suggested a concept in which the e-rupee is issued by the RBI but distributed by commercial banks.

How do you send e-rupee?

Tokens are used in the retail version of the digital rupee. In general, you obtain the recipient’s public key (think of it as an email address) and send money to them using your private key (essentially, a password).

Will it generate interest?

The RBI concept note states that no. They are not interested in the e-rupee. Why? People may take funds from banks and convert them to digital rupees, forcing banks to collapse.

Will it be kept private?

A bank transfer is made from one individual to another. A monetary transfer, on the other hand, is completely anonymous; you have no idea who previously had that particular rupee note. The RBI concept note for e-rupee has advocated partial anonymity, where little amounts can be anonymous but big quantities cannot.

Why should you do so?

Convenience. Transacting in e-rupee can eliminate the need to carry actual notes and coins. Aside from that, the RBI has stated certain advantages for the country as a whole, such as financial inclusion, innovation, and decreased cash transaction costs.

Is it possible to programme it?

Yes, perhaps. It may be configured to accomplish goals such as guaranteeing that it is only spent on a certain area (say, agriculture). Alternatively, it might be given a limited life, similar to a voucher, allowing the RBI to encourage demand when necessary and withdraw it when not. These features have trade-offs, thus the RBI has not yet decided on them.

What if your internet connection fails?

The RBI has suggested offline capabilities for the digital rupee, which means you may conduct transactions without using the internet. However, this might result in duplication, with the same rupee being transferred to many persons. To address such synchronisation concerns, the RBI may impose limitations on offline transactions or seek a technical solution.