What is the e-rupee, and what does the RBI say about it?

Introduction

The Central Bank Digital Currency (CBDC) is a legal tender that the RBI will issue. It will be called the e-rupee or Digital Rupee and is a sovereign currency. You will be able to exchange it. 

Also Read: All you need to know about the Central Bank Digital Currency

Features of the Central Bank Digital Currency (CBDC)

1. Central Bank Digital Currency (CBDC) will be issued by the central bank and will be a sovereign currency. It will be monetary policy aligned. 
2. It will be a liability in the balance sheet of the RBI. 
3. It will be accepted as a safe value store, payment medium, and legal tender by all government agencies, enterprises, and citizens. 
4. It will be free and fully convertible against bank cash and money commercially. 
5. You will not require a bank account, which will be a fungible legal tender. 
6. The central bank expects it to reduce money issuance and transaction costs. 

The E-Rupee or Digital Rupee

On Friday, the Reserve Bank of India said it would start e-rupee's pilot launch for specific uses. It would do this to bolster the digital economy in India. Other reasons include keeping a check on money laundering and making efficient payment systems. RBI said the Central Bank Digital Currency (CBDC) would try to complement and not replace the current money forms. It wants to provide an additional payment method to the users in our country and not replace the current payment forms. The concept paper mentioned by the RBI says that the Digital Rupee will make the payment systems of India more secure, safe, efficient, convenient, accessible, and affordable with the support of state-of-the-art technology. It would help in increasing financial inclusion. The central bank will issue currency notes in a digital form called CBDC. Most central banks worldwide are exploring the option of CBDC issuance. Each country has its own reasons and requirements for exploring this avenue. The GOI announced the launch of CBDC, the Digital Rupee, from the 2022-2023 fiscal year onwards. It announced this on February 1, 2022, Union Budget in Parliament. 

Also Read: The Union Budget said this about the Digital Rupee

What does the RBI say?

The Reserve Bank said it would start the pilot launch of the Digital Rupee for specific uses. It said as the scope and extent of the pilot launch expands, it will continue to inform about the particular benefits and features of the Digital Rupee. You can classify the Central Bank Digital Currency (CBDC) into two types: retail or general purpose (CBDC-R) or wholesale (CBDC-W). As the name suggests, everyone can use CBDC Retail, and the Wholesale type would only be available to a few financial institutions. The note added that the CBDC must incorporate all physical currency features, like finality, universality, and anonymity, to become an exchange medium. The note further said that over 60 central banks worldwide are expressing interest and testing CBDC. Many countries are already implementing it as a pilot, while others are researching or testing their CBDC network. The concept note showed the policy framework, design features, motivation, and background of the Digital Rupee. The concept paper also spoke about the impact of the Digital Rupee on monetary policy. It is still the early stages of the Digital Rupee, and we will have to wait and see where and how it goes. Its introduction is not still evident and is speculative as of now. Only a few countries have issued CBDCs until now. 

CBDC can help in evidence-based policy-making only after it addresses concerns related to Big Data analytics generated from it and anonymity. It might become a healthy data source to provide product insights for service providers. It will also help in putting money laundering regulations in place. The concept note aims to raise awareness about the Central Bank Digital Currency (CBDC) and its features. The note also explains the RBIs stand on CBDC introduction. It wants to create a CBDC just like paper currency and make the process of CBDC introduction seamless.