India’s Digital Rupee in Circulation: RBI to Boost Digital Currency Adoption

Oct 18, 2023 / Reading Time: Approx. 7 mins

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India’s Digital Rupee in Circulation: RBI to Boost Digital Currency Adoption

Our daily lives are becoming progressively digital, and this rapid digital transformation is gaining momentum. Every aspect of Indian society has gone digital, effectively making us a digital nation. This transformation includes everything from routine home tasks to the operation of prominent and revered institutions like banks, healthcare facilities, and educational institutions.

Since December 2022, the Reserve Bank of India (RBI) has been implementing the Digital Rupee (e₹) for particular use cases. The most recent and advanced development in India's digital revolution is the Digital Rupee (e₹), which offers citizens an efficient and secure way to conduct digital transactions.

While presenting the Union Budget for FY 2022-23, Finance Minister Ms Nirmala Sitharaman announced that the Reserve Bank of India (RBI), the Indian central bank, would soon launch an Indian digital currency. This was the first official statement from the Union Government on the much-anticipated digital currency's launch.

The pilot programme for the wholesale Central Bank Digital Currency (CBDC), known as the Digital Rupee-Wholesale (e-W), was launched in November 2022. The use case was limited to the settlement of secondary market transactions in government securities.

In its press release dated November 29, 2022, RBI announced that the launch of the first pilot program for Retail Digital Rupee (e₹-R) would be on December 01, 2022. The e-R is in the form of a digital token that represents legal tender.

It is being issued in the same denominations as the paper currency and coins. It is being distributed through financial intermediaries like banks. Users can transact through e-R using a digital wallet offered by the participating banks.

[Read: Digital Payments in India: Methods and Benefits]

The Reserve Bank of India (RBI) has selected eight banks to take part in the phase-wise e-rupee pilot programme - the initial phase will begin with 4 banks, namely, State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank, in four cities (Mumbai, New Delhi, Bengaluru, and Bhubaneswar) across the country.

Following this, four additional banks, specifically Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank, will join this pilot program subsequently. The scope of the pilot may be expanded gradually to include more banks, users, and locations as needed.

How one can buy and utilise the RBI Digital Rupee (e₹)?

To make transactions easier to access, these eight partner banks have established the Digital Rupee app. Many of you may be receiving SMS or WhatsApp alerts from your banks regarding the use of Digital Rupee transactions if your banks are listed as participants.

The following is the buying procedure for digital rupees:

  • You must access the official website or app of the participating bank. The banks mentioned above currently offer services only for users in 4 cities with access to Digital Rupee.

  • To use the e-rupee wallet, you must first register.

  • If you are eligible to join the Closed User Group (CUG) to take part in the Digital Rupee pilot programme, banks will let you know via SMS and email.

  • After registering, you must add funds to your e₹-R wallet. The e-R wallet is similar to any other mobile digital wallet.

  • You can add funds to your e-R wallet from your linked bank account or from various UPI apps.

  • You can begin making purchases in e-rupee once you have loaded money into your wallet.

You should be aware that the e-rupee is not cryptocurrency but rather a digital representation of your cash or paper money. So, to conduct transactions and pay with an e-rupee, use the QR codes displayed at stores or malls.

Watch this informative video to gain a comprehensive understanding of the digital rupee and its potential impact on the Indian economy. India's own digital currency is poised to revolutionize the way we interact with money.


To understand in-depth about India's Digital Rupee, consider reading...RBI Launches First Pilot for Retail Digital Rupee (e₹-R): Here's All You Should Know

RBI to Make Digital Rupee More Accessible to Businesses and Consumers

The Indian Digital Rupee or e-Rupee had a total market value of Rs 16.39 crore at the end of FY 2022-23, according to the Reserve Bank of India (RBI) Handbook of Statistics on the Indian Economy 2022-23, a key economic and financial indicator.

According to the report, there are Rs 500 notes worth Rs 2.71 crore in circulation, followed by Rs 200 notes worth Rs 1.16 crore and Rs 100 notes worth Rs 0.83 crore. Additional notes of Rs. 50, Rs. 20, and Rs. 10 were added, totaling Rs 0.39 crore, Rs 0.23 crore, and Rs 0.15 crore, respectively.

A Reuters story claims the RBI is collaborating with bankers to roll out new features to promote the Central Bank Digital Currency (CBDC), often known as the e-rupee.

The features include connecting the e-rupee to India's well-known Unified Payments Interface (UPI) and allowing Digital Rupee transactions when a client is offline. With the use of UPI, consumers can send money instantly and in real-time across several banks without revealing their bank account information.

[Read: NPCI Unveils New UPI Features to Achieve 100 Bn Monthly Transactions]

The RBI has been urging banks to make the e-rupee interoperable with UPI through a QR code, this will allow payments to flow via already well-distributed UPI QRs. While, the RBI is considering technology proposals, but it has not yet given its approval.

Speaking on the sidelines of the G20 Summit, Mr Ajay Kumar Choudhary, Executive Director at Reserve Bank of India (RBI), said, "The RBI will introduce the wholesale CBDC in the call market either this month or next month." i.e. October 2023.

The central bank began testing CBDC in the wholesale and retail sectors last year. With wholesale and retail pilots live in the country, the RBI has joined 17 other central banks, including that of China and South Korea, whose pilots are now underway.

On September 14, 2023, RBI Deputy Governor T. Rabi Sankar said, "Around 15,000 transactions are taking place in a day in the pilot testing of retail Central Bank Digital Currency (CBDC); the central bank aims to scale this up to one million transactions a day."

At the G20 Summit's exhibition pavilion, the RBI displayed several digital initiatives in the financial sector. These include the CBDC, UPI One World, RuPay On-The-Go, and Bharat Bill Payment System, as well as the Public Tech Platform (PTP) for Frictionless Credit.

To Summarise...

The Central Bank Digital Currency (CBDC) operates on the robust foundation of blockchain technology, employing encryption and decentralised ledgers to safeguard financial transactions. In addition to safeguarding individuals from online fraud and cyber threats, this intrinsic security will give the unbanked and underbanked population confidence and motivate them to engage in the digital economy actively.

CBDCs are considered to be inherently affordable as they would, eliminate financial barriers, offering a cost-effective means of conducting financial transactions, especially for individuals with little access to cash. More than a million users and 262,000 merchants had signed up for the pilot on retail CBDC transactions as of June 2023.

Indian Central Bank Digital Currencies (CBDCs) are still in the early stages of development, yet the country has seen a huge surge in digital payments, which has fueled the desire for a paperless digital economy. The cost of printing and reliance on physical currency will gradually decline with the arrival of digital currency.

The Wholesale and Retail 'Digital Rupee' launch opened the door for more secure and cashless digital transactions. The RBI's encouragement of the use of digital currency has the potential to accelerate the digitalisation of many industries and contribute to the expansion of the Indian economy.

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.


Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

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