Central bank digital currency: How can ‘aam aadmi’ use CBDC or e-Rupi?

Just like the BHIM UPI, the government is very likely to launch an app for e-rupi, say experts.

E-Rupi is an electronic version of cash and RBI launched its pilot project on Dec 1. (Image: FreePik and Bhim official website)

The Reserve Bank of India (RBI) launched a pilot project on its digital currency or e-Rupi on Thursday, December 1. Digital currency is an electronic version of cash and will be primarily meant for retail transactions. The pilot will initially be carried away in a handful of banks like ICICI, HDFC, State Bank of India (SBI) in the four cities of Mumbai, New Delhi, Bengaluru, and Bhubaneswar.

But how can common people use e-rupi? In fact, what was the need for having this digital currency when the unified payment interface (UPI) has gained so much prominence in the past few years? We answer these queries here:

How can we use e-rupi through our phones?

Just like the BHIM UPI, the government is very likely to launch an app for e-rupee, say experts. As of now, those banks that are a part of the pilot project will create a wallet for the digital rupee and it is likely individuals can access the wallet through the respective bank apps.

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“The customers of these banks can now avail e-rupee through the banks’ app. But very soon the government will surely launch an app like BHIM-UPI for e-rupee and individuals can use it,” said Rachit Chawla, CEO of Finway FSC, a digital lending platform.

One of the major differences between UPI and e-rupi wallet is that e-rupi wallet need not be linked with any bank accounts. But for carrying out transactions through UPI, the customers need to link the wallet with a bank account.

“There will be a separate KYC process carried out for the e-rupi wallet. So, even people without bank accounts can have an e-rupi wallet, if they complete the KYC process for the wallet,” added Mahesh Shukla, CEO & Founder, PayMe, a Fintech app involved in lending and cash support.

Moreover, even individuals who use old feature phones can use e-rupi. “A pro of using the e-rupee is that it allows offline transactions which can be carried out on feature phones, promoting its adoption in rural and remote areas as well. Since the e-rupee voucher will be shared with the beneficiary through an SMS or QR code,” added Kunal Chowdhry, CEO, of Apollo Singapore Investments.

What was the need for CBDC?

Experts pointed out that one major challenge for the rural population is to have a debit card against their bank account/accounts. Many times, it has been found that even people having Jan-Dhan account don’t have a valid debit card. And without a valid debit card, it is impossible to use UPI. This challenge will be addressed with the use of e-Rupi.

Rather, the government may even take initiatives to ensure that the process of KYC is simplified for the e-rupi wallet.

“In the case of CBDC, transaction trail will be available within CBDC nodes, since the distribution of the CBDC will be by REs (Regulated Entities) only. It would be offered to users with verified KYC documents. In some special cases may be users may avail the service without the KYC process as well,” added Vishwas Patel, Executive Director, Infibeam Avenues Ltd, the parent company of CCAvenue, a payment gateway brand.

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Central Bank Digital Currency (CBDC)Central Bank Digital Currency by RBI