Jump to content

Digital rupee

From Wikipedia, the free encyclopedia

This is an old revision of this page, as edited by Surabhi9191 (talk | contribs) at 05:58, 4 January 2024 (→Pilot project: CBDC retail : one million daily transactions on 27 December 2023. UBI plans to transfer employee benefits on CBDC wallet.). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

Digital Rupee (e₹)

Logo of Digital Rupee
Digital Banknotes and Coins
Digital Banknotes and Coins
ISO 4217
CodeINR (numeric: 356)
Subunit0.01
Unit
UnitRupee
Symbole₹‎
Denominations
Subunit
 1⁄100paisa
Symbol
 paisa
Banknotes
 Freq. usede₹2, e₹5, e₹10, e₹20, e₹50, e₹100, e₹200, e₹500, e₹2,000
Coins
 Freq. used50e, e₹1
Demographics
Date of introduction
  • e₹-W: 1 November 2022; 2 years ago (1 November 2022) (pilot test)[1]
  • e₹-R: 1 December 2022; 23 months ago (1 December 2022) (pilot test)[2]
User(s) India
Issuance
Central bankReserve Bank of India
 Websitewww.rbi.org.in
Printer
 Website
Valuation
InflationDecrease 5.02% (October 2023)[4]
 SourceRBI – Annual Inflation Report
 MethodConsumer price index (India)[5]
Pegged with Indian Rupee (at par)
ValueUSD $1 = e₹83.23
EUR €1 = e₹90.22
INR ₹1 = e₹1.00
CNY ¥1 = e₹11.78
(16 November 2023)

The Digital Rupee (e₹)[6] or eINR or E-Rupee is a tokenised digital version of the Indian Rupee, issued by the Reserve Bank of India (RBI) as a central bank digital currency (CBDC).[7] The Digital Rupee was proposed in January 2017 and launched on 1 December 2022.[8] Digital Rupee is using blockchain distributed-ledger technology.[9]

Like banknotes it will be uniquely identifiable and regulated by Central Bank. Liability lies with RBI. Plans include online and offline accessibility.[10] RBI launched Digital Rupee for Wholesale (e₹-W) catering to financial institutions for interbank settlements and Digital Rupee for Retail (e₹-R) for consumer and business transactions.[11] The implementation of the Digital Rupee aims to remove the security printing cost borne by the general public, businesses, banks, and RBI on physical currency which amounted to ₹49,848,000,000.[12] [4984.8 X1,00,00,000 = ~5000 Crores]

History

In 2017, a high level inter-ministerial committee (IMC) was formed under the Department of Economic Affairs in Ministry of Finance (MoF) on the governance and usage of virtual currencies in India and recommended a digital form of fiat currency using Distributed Ledger Technology (DLT). The Department of Financial Services of MoF, Ministry of Electronics and Information Technology (MeitY) and the Reserve Bank of India (RBI) were invited to form a special group that will look into legal and technological development of CBDC.[13] Without any official recognization to cryptocurrencies, RBI started planning on future CBDC development.[14]

The RBI on 16 December 2020 announced a regulatory sandbox to test next generation technologies on cross border payments to collect field test data and evidence of benefits and risks on the financial ecosystem.[15] On 29 January 2021, the Indian Government proposed a bill to ban trading and investments in cryptocurrencies while giving legal power to RBI for developing CBDC, termed as "programmable digital rupee" using the experience gained from handling Unified Payments Interface (UPI), Immediate Payment Service (IMPS) and Real-time gross settlement (RTGS) for distribution and validation purpose.[16][17]

As per the Currency and Finance Report of 2021 released by RBI, CBDC backed by the sovereign must promote non-anonymity of monetary transactions and financial inclusion by direct transfers. It must be compliant with national and global money laundering and economic terrorism laws.[18] RBI was planning the initial stage of CBDC trials from December 2021.[19] But now it moved to Q1 2022 before nationwide rollout in phased manner.[20] As per Governor Shaktikanta Das, RBI is still in discussion whether to go with centralized system or use Distributed Ledger Technology.[21] While the preliminary study will be conducted soon, RBI started internal evaluation on scope, legal framework, calibration, technology, distribution and validation mechanism of CBDC citing increase in digital transaction during the COVID-19 pandemic.[22][23][24]

The Government of India is working on amendments for The Coinage Act, 2011,[25] Foreign Exchange Management Act (FEMA), 1999, Information Technology Act, 2000 and Crypto-currency and Regulation of Official Digital Currency Bill, 2021 that will govern CBDC in the country.[26][27]

The Department of Financial Services, Ministry of Health and Family Welfare and National Health Authority introduced e-RUPI on 2 August 2021 which is a prepaid person specific, purpose specific e-voucher based on QR code or SMS string that doesn't require bank account to make it leak proof. It is going to act as a precursor by highlighting the gaps in national digital payment infrastructure that needs further improvement before the nationwide launch of CBDC.[28][29] At 2022 Union budget of India, Nirmala Sitharaman from the Ministry of Finance announced the roll out of the Digital Rupee starting from 2023.[30] As per the International Monetary Fund, the Digital Rupee can help in currency management and cross border payments in view of high volume of inbound remittance.[31][32]

The pilot in wholesale segment, known as the Digital Rupee -Wholesale (e₹-W), was launched on 1 November 2022, with use case being limited to the settlement of secondary market transactions in government securities. Use of (e₹-W), is expected to make the inter-bank market more efficient. Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk. The pilot in retail segment, known as digital Rupee-Retail (e₹-R), was launched on 1 December 2022, within a closed user group (CUG) comprising participating customers and merchants.[33]

Concept stage

RBI started the process of designing CBDC framework in 2022.[34] Finance Bill 2022 enacted with amendments in Reserve Bank of India Act, 1934 for CBDC. Reserve Bank Innovation Hub (RBIH) will develop proof of concept and run the pilot project before launch.[35] As per Payments Vision 2025 document released by RBI on 17 June 2022, CBDC will be used for domestic and cross border payment processing and settlement. RBI classified CBDC into retail CBDC that will be designed to complete individual financial needs and wholesale CBDC which will be traded between RBI, Public and Private sector banks for currency distribution purpose and economic stability. RBI is also exploring purpose driven CBDC for Direct Benefit Transfer (DBT) to reduce subsidy leakage and corruption.[36][37]

For internal pilot project, RBI started consultation with FIS, State Bank of India, Punjab National Bank, Union Bank of India and Bank of Baroda.[38] On 5 October 2022 the Fintech Department of RBI released a concept note to create awareness on CBDC and the planned features of upcoming Digital Rupee (e₹).[6][39] The structure of Digital Rupee will be either token-based or account-based. For a token-based CBDC, it will act closer to physical cash and able to perform retail transactions. Account-based CBDC is for maintaining the balance sheet and is considered for institutional level wholesale transactions. For issuance, RBI is looking at single tier direct model where the central bank keeps control over every aspect of CBDC from account-keeping to transaction verification or a two tier indirect model where RBI issues CBDC to retail banks and financial service providers for wider circulation. RBI is also looking at offline transaction support.[40]

In token-based system, a common public key will be used to initiate the transfer while private key such as user defined password will be used as verification tool to complete the transfer. As per RBI, an e-wallet will be provided for transaction purpose and bank account is not required. While transaction of smaller sums will remain anonymous, larger sums will require self disclosure in compliance with national and global money laundering and economic terrorism laws.[41]

e₹-R will be outside commercial banking system that can help reduce concentration of liquidity and credit risks in payment systems mediated through commercial banks.[42] As per RBI, CBDC will be an additional payment avenue for users and is not meant for replacing existing payment systems. The objective behind CBDC is to support and encourage the growing digital economy, reduce cost of physical cash management, create an efficient monetary payment system and further increase financial inclusion. Digital Rupee is convertible to paper currency without change in value and will show in RBI balance sheet to build trust, safety, liquidity, settlement finality and integrity. To mitigate the risk of introducing a new technology in currency circulation, RBI will design the characteristics of Digital Rupee closer to paper currency and introduce it in a seamless manner. Official launch may happen after 31 March 2023.[43]

Offline usage

RBI is thinking about adding an offline usage capability to the digital rupee to offer availability and resilience in the event of a network outage or programmability issues. Without requiring a check-in with an online ledger, the offline digital payment systems could validate transactions and confirm the existence of funds.[44]

Pilot project

Digital Rupee for Wholesale (e₹-W) was launched on 1 November 2022.[45] It will be used to settle secondary market transaction in government securities. It will help cut transaction cost and preventing the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk. State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC are participating in the pilot project.[46] Shaktikanta Das on 2 November 2022 revealed that Digital Rupee for Retail (e₹-R) will also start similar trial in the same month.[47] Each participating bank will test e₹-R among 10,000 to 50,000 people. RBI will collaborate with PayNearby and Bankit to integrate CBDC as payment option while National Payments Corporation of India (NPCI) will manage the backend infrastructure.[48]

RBI will also undertake cross border transactions using Digital Rupee during the pilot project.[49] On 1 November 2022, RBI used Digital Rupee to settle Indian government bonds in secondary market transactions worth ₹2.75 billion Indian rupees ($33.29 million).[50] The Phase-1 of pilot project for e₹-R will start from 1 December 2022 in Mumbai, New Delhi, Bengaluru, and Bhubaneswar under State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla will be included in Phase-2 under Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank.[51] e₹-R will have both P2P and P2M support. A person can pay using QR code.[52] Once e₹-R transferred to individual wallet, small value transactions will not be traced by banks to maintain anonymity.[53]

In November 2022, e₹-W on average did ₹3,250,000,000 worth of deals per day. For the first two days of e₹-R pilot, ₹30,000,000 worth of digital currencies were created by RBI. Unlike physical currency, there is an option for recovery against loss of e₹. In e₹-R pilot phase, RBI is testing specific use cases for P2P and P2M transaction. RBI is also planning to extend use case of e₹ in cross border transaction at institutional and individual level.[54] As per Minister of State for Finance Pankaj Chaudhary, CBDC in itself will not earn any interest but can be converted into bank deposits. He also clarified that e₹-R is using Blockchain technology.[55] As per RBI, Digital Rupee has reached 50,000 users and 5,000 merchants as of 8 February 2023.[56] RBI is going to launch pilot project for inter-bank borrowing using digital rupee from October 2023.[57]

In the retail sector usage of the Digital Rupee, the RBI has achieved its goal of one million daily transactions on 27 December 2023.[58] The administration of Union Bank of India (UBI) plans to transfer numerous employee benefits on CBDC wallet in an effort to promote the wallet, nevertheless, the employee federation advocacy group wants the management to take the employees into confidence first regarding the usage.[59]

UPI Interoperability

As part of the Central Bank Digital Currency pilot project, Canara Bank has released the Unified Payments Interface compatible digital rupee mobile app. Without the need for a separate on-boarding procedure for CBDC for retailers, it will enable users to scan the existing UPI QR code and make payments using digital rupee. Customers in 26 Indian cities who have been whitelisted can access the service as part of a pilot program.[60] On 30 August 2023, Yes Bank unveiled the integration of UPI for digital rupee payment. Customers can send digital rupee using existing UPI virtual payment addresses.[61] Beginning on 4 September 2023, State Bank of India (SBI) started offering UPI compatibility with digital rupee. This integration was made possible by SBI's involvement in the RBI's December 2022 retail digital e-rupee project.[62]

Cross-border settlement

The RBI Internal Working Group is looking for the viability of rapid and low-cost digital cross-border settlements using the CBDC mechanism, with their counterparts in the US, Hong Kong, and SWIFT.[63]

Market acceptance

Reliance Retail in partnership with Innoviti Technologies, ICICI Bank and Kotak Mahindra Bank became the first big organised retail chain in the country to accept e₹-R.[64] CCAvenue became the first payment gateway to process e₹-R for online retail transaction.[65] A cooperation between Indraprastha Gas and IndusInd Bank was launched, with the aim of enabling the usage of digital rupee at specific gas stations within the National Capital Region (NCR) area.[66]

See also

References

  1. ^ Suvarna, Manish M. (9 November 2022). "G-sec transactions using digital rupee recorded highest volume since inception on November 7". Moneycontrol. Retrieved 8 December 2022.
  2. ^ Ray, Anulekha (6 December 2022). "RBI retail digital rupee pilot starts: Who can use e-Rupee?". The Economic Times. Retrieved 8 December 2022.
  3. ^ Mishra, Ankur (1 February 2022). "Budget 2022: Digital Rupee to be issued by RBI in FY23". TimesNow. Retrieved 15 December 2022.
  4. ^ "Instant View: India's retail inflation eases to 5.02% in September". Reuters. 12 October 2023. Archived from the original on 12 October 2023. Retrieved 12 October 2023.
  5. ^ "Annual Report : Inflation, Money and Credit". Reserve Bank of India. 27 May 2021. Retrieved 6 November 2022.
  6. ^ a b "Issuance of Concept Note on Central Bank Digital Currency" (PDF). Reserve Bank of India. FinTech Department. 7 October 2022. Retrieved 3 November 2022.
  7. ^ "The e₹ is on the way as RBI gears up for a pilot launch of its own digital currency". Moneycontrol. 10 October 2022. Retrieved 3 November 2022.
  8. ^ Delhi, PIB (12 December 2022). "PIB press release". pib. Retrieved 31 July 2023.
  9. ^ Anand, Nupur (7 December 2022). "India cenbank says digital currency transactions to stay largely anonymous". Reuters. Retrieved 5 January 2023.
  10. ^ Bhardwaj, Shashank. "India's Central Bank Plans Graded Implementation Of CBDC". Forbes India. Retrieved 3 November 2022.
  11. ^ Delhi, PIB (12 December 2022). "PIB press release". pib. Retrieved 31 July 2023.
  12. ^ Kaushal, Teena Jain (1 November 2022). "RBI's Digital Rupee pilot launch today: Here are 10 things to know". Business Today. Retrieved 4 November 2022.
  13. ^ "Report of the Committee to propose specific actions to be taken in relation to Virtual Currencies" (PDF). Ministry of Finance. Government of India. Retrieved 12 August 2021.
  14. ^ Pandit, Shivanand (11 August 2021). "Rupee reboot". Law.asia. Retrieved 12 August 2021.
  15. ^ "Regulatory Sandbox: RBI seeks applications under second cohort". Business Standard India. 16 December 2020. Retrieved 7 August 2021.
  16. ^ "Lok Sabha: General Information relating to Parliamentary and other matters" (PDF). Parliament of India. 29 January 2021. Retrieved 7 August 2021.
  17. ^ "BIS Innovation Hub and Monetary Authority of Singapore publish proposal for enhancing global real-time retail payments network connectivity". Bank for International Settlements. 28 July 2021. Retrieved 4 November 2022.
  18. ^ Nag, Anirban (22 July 2021). "India Eyeing Phased Roll Out of Central Bank Digital Currency". Bloomberg. Retrieved 8 August 2021.
  19. ^ "Will India soon have its own Central Bank Digital Currency?". The Times of India. 6 September 2021. Retrieved 6 September 2021.
  20. ^ "India cenbank may launch digital currency pilot next year-report". Reuters. 18 November 2021. Retrieved 19 November 2021.
  21. ^ Choudhury, Saheli Roy (27 August 2021). "India could begin trials for a digital rupee by December, central bank governor says". CNBC. Retrieved 28 August 2021.
  22. ^ Panda, Subrata (6 August 2021). "RBI's model on India's digital currency could come out by 2021-end". Business Standard India. Retrieved 7 August 2021.
  23. ^ Kaul, Abhinav (24 July 2021). "RBI to launch CBDCs: What does it mean for the future of cryptocurrencies?". Mint. Retrieved 7 August 2021.
  24. ^ Kajarekar, Radhika (30 July 2021). "Digital Payments Rise By 30% In India Due To Lockdowns, Pandemic: Indians Using Less Cash Now?". Trak.in. Retrieved 7 August 2021.
  25. ^ "THE COINAGE ACT, 2011" (PDF). Reserve Bank of India. 1 September 2011. Retrieved 7 August 2021.
  26. ^ Bhattacharya, Saurya (25 July 2021). "Cryptocurrency, CBDC and the RBI Act". Business Line. Retrieved 7 August 2021.
  27. ^ Variath, Adithya Anil (26 November 2021). "Cryptocurrency Bill | India's First Step To Exercise Its Sovereignty Over Digital Currency". Moneycontrol. Retrieved 26 November 2021.
  28. ^ Iyer, Priyanka (3 August 2021). "Explained | What Is E-RUPI And Does It Lay The Ground For RBI's Digital Currency?". Moneycontrol. Retrieved 7 August 2021.
  29. ^ Mukul, Pranav (7 August 2021). "e-RUPI: A voucher system ahead of digital currency". The Indian Express. Retrieved 7 August 2021.
  30. ^ Bose, Shritama (2 February 2022). "Budget 2022: Digital rupee from FY23". Financial Express. Retrieved 2 February 2022.
  31. ^ Badkar, Shloka; Singh, Ritu (22 December 2022). "India should prioritise a CBDC that expedites cross-border payments: IMF". CNBCTV18. Retrieved 28 December 2022.
  32. ^ G, Sangeetha (27 December 2022). "RBI's digital rupee useful in overseas payments: IMF". Deccan Chronicle. Retrieved 28 December 2022.
  33. ^ Delhi, PIB (12 December 2022). "PIB press release". pib. Retrieved 31 July 2023.
  34. ^ Ahluwalia, Shilpa Mankar (18 April 2022). "Cross-border CBDC payment solutions have the potential to create a seamless, low-cost, and transparent system for cross-border payments that allows for real-time settlement". Moneycontrol. Retrieved 18 April 2022.
  35. ^ "India's Own Digital Currency to be Introduced in Phased Manner, RBI Forms Innovation Hub". News18. 27 May 2022. Retrieved 3 June 2022.
  36. ^ Sarkar, Gargi (23 June 2022). "India's CBDC Set To Take Off: From Cross-Border Payments To Subsidies — Here Are The Use Cases On The Table". Inc42 Media. Retrieved 23 June 2022.
  37. ^ "Payments Vision 2025" (PDF). Reserve Bank of India. 17 June 2022. Retrieved 20 June 2022.
  38. ^ Shukla, Piyush (5 September 2022). "RBI in talks with 4 banks, fintechs for digital currency launch this financial year". Moneycontrol. Retrieved 9 September 2022.
  39. ^ "Concept Note on Central Bank Digital Currency" (PDF). Reserve Bank of India. Retrieved 3 November 2022.
  40. ^ Vyas, Hitesh (9 October 2022). "Pilot launch of e-rupee for specific use cases: What is the RBI's plan". The Indian Express. Retrieved 4 November 2022.
  41. ^ "Differences between Digital Rupee and Cryptocurrency". Jagranjosh. 3 November 2022. Retrieved 5 November 2022.
  42. ^ D, Priyadarshini (4 November 2022). "UPI powers India's digital transactions. RBI's eRupee is compelling but must argue retail use". ThePrint. Retrieved 5 November 2022.
  43. ^ "The e₹ is on the way as RBI gears up for a pilot launch of its own digital currency". Moneycontrol. 10 October 2022. Retrieved 4 November 2022.
  44. ^ Keshri, Gyanendra (5 September 2023). "RBI weighs introducing offline usage features in digital rupee". Deccan Herald. Retrieved 3 December 2023.
  45. ^ "India cenbank to start pilot of digital rupee on Nov 1". Reuters. 31 October 2022. Retrieved 4 November 2022.
  46. ^ "First pilot of Digital Rupee to commence on Tuesday: RBI - Times of India". The Times of India. 31 October 2022. Retrieved 31 October 2022.
  47. ^ "RBI's retail e-rupee pilot to start this month itself: RBI governor". The Economic Times. 2 November 2022. Retrieved 4 November 2022.
  48. ^ Shukla, Saloni (19 November 2022). "RBI in final stages of retail CBDC pilot rollout". The Economic Times. Retrieved 22 November 2022.
  49. ^ Ray, Anulekha (4 November 2022). "RBI CBDC: Digital Rupee pilot starts from November 1; SBI, HDFC, 7 other banks to participate in wholesale launch". The Economic Times. Retrieved 4 November 2022.
  50. ^ Dhutia, Dharamraj (1 November 2022). "India uses e-rupee to settle 2.75 billion rupees of govt bonds". Reuters. Retrieved 4 November 2022.
  51. ^ "Digital rupee pilot project launching on Dec 1: what is it and how will it work?". The Indian Express. 29 November 2022. Retrieved 30 November 2022.
  52. ^ Bose, Arghanshu (30 November 2022). "Explained: What is RBI digital rupee and how to use it". The Times of India. Retrieved 30 November 2022.
  53. ^ Shukla, Saloni (1 December 2022). "e-Rupee may offer same anonymity as dealing in cash". The Economic Times. Retrieved 3 December 2022.
  54. ^ Saha, Manojit (6 December 2022). "Transactions in CBDC pilots gather pace, all minor glitches fixed swiftly". Business Standard. Retrieved 16 December 2022.
  55. ^ Rao, Aprameya (13 December 2022). "Digital Rupee Pilot Has Blockchain Components, Features Of Physical Cash: Government". NDTV. Retrieved 15 December 2022.
  56. ^ Jose, Teena (9 February 2023). "Entrepreneur | Digital Rupee Has 50,000 Users And 5000 Merchants: RBI". Entrepreneur. Retrieved 16 February 2023.
  57. ^ "Reserve Bank of India likely to start digital rupee pilot in call money market by October". cnbctv18.com. 10 September 2023. Retrieved 3 December 2023.
  58. ^ Upasani, Siddharth (1 January 2024). "RBI meets target as December 27 saw more than 1 million CBDC transactions". Moneycontrol. Retrieved 4 January 2024.
  59. ^ Ray, Atmadip (2 January 2024). "Union Bank of India employees unhappy for getting perks in digital currency". The Economic Times. ISSN 0013-0389. Retrieved 4 January 2024.
  60. ^ "Canara Bank launches UPI Interoperable Digital Rupee mobile app". ETBFSI.com. 21 August 2023. Retrieved 17 November 2023.
  61. ^ Bhardwaj, Shashank (5 September 2023). "India's Next Step In Crypto: Digital Rupee's New Frontier With Yes Bank UPI Integration". Forbes India. Retrieved 17 November 2023.
  62. ^ Mishra, Arushi (4 September 2023). "SBI offers UPI integration with digital rupee". BusinessLine. Retrieved 3 December 2023.
  63. ^ Mahanta, Vinod; Nayak, Gayatri (28 November 2023). "RBI, international counterparts discuss CBDCs for cross-border settlements". The Economic Times. ISSN 0013-0389. Retrieved 2 December 2023.
  64. ^ Madhukalya, Anwesha (2 February 2023). "Reliance Retail becomes first retailer to accept payments via Digital Rupee at its Freshpik stores in Mumbai". Business Today. Retrieved 3 February 2023.
  65. ^ "Infibeam Avenues brand CCAvenue to process Digital Rupee". mint. 30 January 2023. Retrieved 5 February 2023.
  66. ^ "IGL and IndusInd Bank partner to drive digital rupee acceptance in Delhi-NCR". ETEnergyworld.com. Retrieved 3 December 2023.

Reserve Bank of India:

Ministry of Finance:

Retrieved from "https://en.wikipedia.org/w/index.php?title=Digital_rupee&oldid=1193515323"