What is the e-Rupee?

The RBI just made e-Rupees available to a select group of people yesterday and we have to talk about it. But we will do this story a bit differently. Instead of going over the mechanics like we usually do, we will ask a series of questions. Questions that are dominating the discussion right now and try to answer them as best as we can.

Right now if you must transfer money over UPI, you have to make a request and forward it to your bank. The bank then decides to deduct the balance and transfer it to the beneficiary account. In the background, banks also trigger an elaborate clearing and settlement process to make sure everybody gets paid what they’re owed and not a penny more.

So there’s a chain of intermediaries who enable this transaction.

With the digital rupee, however, you don’t need intermediaries at all. You could simply transfer digital money from your wallet to another wallet (belonging to an individual or a merchant) just as if you were handing them physical cash. The transaction is final. The settlement is final and you may not even need an internet connection.

It’s just like physical cash, only it’s entirely digitized.

right now the currency will only be made available to a closed group of people in select cities. But if you were part of this lucky group, here’s how you’d go about transacting with the digital rupee.

First, you’d install the CBDC app (Central Bank backed digital currency app) and use a phone number linked to a bank account. Once you register successfully on the app, you will be assigned a digital wallet with a unique ID. You can then load the wallet by transferring money from your bank account. Now here’s where things get interesting. The app will let you pick currency in any denomination you like. So if you’re loading ₹10,000, one way you could do this is by asking — ₹500×16 units, 100×10 units and ₹50×20 units.

And once you confirm, your wallet will include digital currency in these denominations.

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