New Delhi: In November, Unified Payment Interface (UPI) transactions soared to a record value of Rs 17.4 trillion, marking a 1.4% increase from October’s Rs 17.16 trillion. Despite a 1.5% decrease in transactions to 11.24 billion, compared to October’s peak of 11.41 billion, the UPI continues to play a pivotal role in India’s digital financial landscape.

Data from the National Payments Corporation of India (NPCI) reveals a substantial year-on-year growth of 54% in volume and 46% in value compared to the same month in the previous year.

The success of UPI in boosting the Indian economy has been evident since its inception. However, a significant development has taken place with the Reserve Bank of India (RBI) unveiling the Central Bank Digital Currency (CBDC) on December 1, 2022.

The Digital Rupee, also known as e₹ or E-Rupee, represents a tokenized digital version of the Indian Rupee, issued by the RBI as a central bank digital currency (CBDC). Proposed in January 2017, it officially launched on December 1, 2022.

How Digital Rupee Operates:

RBI generates tokens and distributes them to selected banks, known as Token Service Providers (TSPs), participating in the Digital Rupee Pilot Program. TSPs then allocate tokens to interested parties, functioning similarly to physical bank notes or coins but in digital form.

Storage and Transactions:

Users can store Digital Rupees in their bank’s digital wallet CBDC-R app, facilitating entirely paperless transactions.

Comparison with Other Payment Methods:

·       Cash vs e₹: Similar to cash transactions, users transfer e₹ from their e₹ Wallet to others.

·       UPI vs e₹: Unlike e₹, which is a currency, UPI serves as a payment system for transferring money between bank accounts through an intermediary.

·       Bitcoin vs e₹: While cryptocurrencies rely on decentralized networks, the Digital Rupee involves the central bank in transaction settlements, offering stability comparable to the rupee.

Multiple banks, including Canara Bank, IDFC First Bank, IndusInd Bank, UBI, PNB, ICICI Bank, SBI, HDFC, among others, have introduced their CBDC apps for seamless digital transactions.

The aim is to reduce risks and cut expenses associated with managing physical currency, including the costs related to replacing worn-out notes, transportation, insurance, and logistics. Additionally, it aims to discourage the use of cryptocurrencies for money transfers.