E-Rupee: India’s Very Own Digital Legal Tender

There is a growing increase in interest towards cashless societies and digital currencies. The
possibility of using government-backed digital currency becomes a worldwide phenomenon.
One such concept is that of the Central Bank Digital Currency (CBDC), the digital form of the fiat
currency of a country.

India has recently introduced a pilot for its CBDC. The term E-Rupee was coined as the digital
money of India. In October 2022, RBI released a press release regarding the introduction of the
same. This note included the detailed plan intricated by the RBI for introducing its digital
currency. It also consisted of objectives, choices, benefits and risks of issuing a CBDC in India.

CBDC provides privacy, transferability, convenience, accessibility, and financial security. CBDCs
could also decrease the maintenance of a complex economic system, reduce cross-border
transaction costs, and provide lower-cost alternatives to money-transferring methods. These
lead to promoting financial inclusion and simplifying the implementation of monetary and fiscal
policy.

Subsequently, RBI announced that the first pilot in the digital Rupee - Wholesale segment
(e₹-W) would commence on November 1 and the second for retail digital Rupee (e₹-R) on
December 01, 2022. RBI identified 9 banks for participation in the pilot for the same. However,
four banks are selected primarily for e₹-R, and another 4 would join subsequently.

Gradually, RBI may plan an expansion to increase the extent of the pilot to include more banks.
But as of now, engagement in terms of value has been relatively low. RBI is finding solutions to
combat this situation.

Sources:
-https://m.rbi.org.in//Scripts/BS_PressReleaseDisplay.aspx?prid=54510
-https://www.google.com/amp/s/www.thehindubusinessline.com/blexplainer/bl-explainer-
rbis-e-rupee-versus-upi/article66213758.ece/amp/
-https://www.investopedia.com/terms/c/central-bank-digital-currency-cbdc.asp