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Context

• Leading fintech companies like Google Pay, PhonePe, Amazon Pay, Cred, and Mobikwik are exploring the integration of the Indian central bank’s digital currency, known as the e-rupee, into their platforms.
• By incorporating e-rupee transactions via the Unified Payments Interface (UPI), these companies aim to expand their functionalities beyond traditional bank-linked payment transactions.

 MUST READ ARTICLE ON e-RUPEE: https://www.iasgyan.in/daily-current-affairs/digital-rupee-or-e-rupee

MUST READ ARTICLE ON e-RUPEE:https://www.iasgyan.in/ias-gazette-magazine/e-rupi-digital-currency-push

What is E-Rupee?

• The e-rupee, or digital rupee, is a digital currency issued by the Reserve Bank of India (RBI).
• It is entirely electronic and operates within a computer network.
• As a legal tender, the digital rupee functions similarly to physical banknotes but is exclusively used for online transactions.

Differences Between E-Rupee and Banknotes

Comparison with Deposits

• The e-rupee is a legal tender issued by the central bank but differs from traditional bank deposits.
• Unlike deposits that accrue interest, the digital rupee does not earn interest from the central bank.
• However, users can convert their bank deposits into e-rupees and vice versa for convenience.

Launch and Purpose of the Digital Rupee

• The digital rupee was launched in December 2022 on a pilot basis.
• Initially available through selected public and private banks in major cities, it supports both person-to-person and person-to-merchant transactions.
• The digital rupee was introduced as an alternative to cryptocurrencies, aiming to enhance transaction transparency and reduce the costs associated with traditional fiat currency

E-Rupee's Performance

• Following its launch, the e-rupee saw an increase in adoption, with transactions peaking at over 1 million per day late last year. However, usage has since decreased, with current daily transactions ranging between 100,000 and 200,000.

Why Fintech Companies Are Joining the E-Rupee Project

Strategic Motivation

• With Google Pay, PhonePe, Amazon Pay, MobiKwik, and Cred handling over 85% of digital UPI payments in India, their involvement in the e-rupee project could significantly boost the currency's adoption.
• The RBI hopes that integrating the digital rupee into popular fintech platforms will encourage wider use.
• Despite these efforts, the RBI is not planning a full-scale launch soon; the digital rupee will remain in the pilot phase for the next few years.

Conclusion

• The collaboration between major fintech companies and the RBI’s e-rupee project represents a crucial step toward broadening the digital currency's use and acceptance.
• As the digital rupee continues its pilot phase, its integration into widely-used platforms could play a key role in shaping the future of digital transactions in India.

MUST READ ARTICLE ON e-RUPEE: https://www.iasgyan.in/daily-current-affairs/digital-rupee-or-e-rupee

MUST READ ARTICLE ON e-RUPEE:https://www.iasgyan.in/ias-gazette-magazine/e-rupi-digital-currency-push 

PRACTICE QUESTION Q. Evaluate the benefits and disadvantages of digital currency. Discuss the key features of the Digital Rupee and how they address these challenges.

SOURCE:THE HINDU