On Tuesday (29 November 2023), the Reserve Bank of India announced that a pilot programme for the retail digital rupee (eRs-R) would begin on December 1. RBI has made this move to digitalize currency and facilitate cashless payment. They also stated that it will provide trust, security, and a finalized settlement.
What is Digital Currency?
The eRs-R would function as a digital token that can be exchanged for real money in a store. This digital system, built on the blockchain, is the only one that can be used for transactions. The goal here is to encourage the use of digital payment systems as an alternative to traditional cash transactions. Both P2P (person-to-person) and P2M (person-to-merchant) exchanges are possible. To be clear, you won’t be able to get your hands on actual cash. It can be exchanged for other monies, such as bank deposits, and is not subject to inflation like cash is.
Is it the same as Digital Wallet?
Countless number of people throughout the world have started using UPI and mobile wallets. Experts, however, argue that the digital rupee is not a direct competition to established payment methods but rather a new means of payment that is distinct from conventional digital transactions. In contrast to UPI, this method is rather unique.
How Digital Rupee work?
The Reserve Bank of India (RBI) has launched India’s first official digital rupee, and it may be purchased at four major banks across the country. The customer would first purchase digital currency from the bank, and then use the currency to make payments directly across wallets.
In the initial step, four banks in four different cities would be involved: State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. It has been announced that four additional banks—Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank, will soon be participating in this experiment. However, the programme would be launched in four cities: Mumbai, New Delhi, Bangalore, and Bhubaneswar. Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla are just some of the cities that will eventually be included.
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