Digital Rupee: A brief introduction

09 January 2023

What is a digital rupee?

The Reserve Bank of India has launched the pilot of its Central Bank Digital Currency (CBDC), which is being categorized as legal tender in a digital form, by the central bank. Popularly recognized as the digital rupee, it is exchangeable at par with existing currencies and will be considered acceptable for payments and a safe store of value. The Reserve Bank announced the launch of the first pilot for retail digital Rupee (symbolized as “e₹-R”) on December 01, 2022.

The pilot is set to cover locations which have been notified by the RBI and are mentioned hereinbelow. The pilot will be available for a closed user group (CUG) comprising participating customers and merchants. The e₹-R shall be in the form of a digital token that represents legal tender. The denominations of this digital token are being touted to be the same as that of the paper currency. Banks shall be responsible for the distribution of the digital currency. Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones / devices. The users will be able to transact on a Person to Person (P2P) basis as well as Person to Merchant (P2M) basis too. The Merchants will be having QR codes at the Merchant locations to enable them to accept the e₹-R. The e₹-R would offer features of physical cash like trust, safety and settlement finality. However, as is the case with cash, the digital currency will not earn any interest and may not be subject to conversion to other forms of money, like deposits with banks.

Why is digital currency important for India?

It is safe to state that the most important reason behind launching the digital currency by the RBI is to provide the country with a catalyst to remain in the virtual currency race. The potential that India and its huge populace carries is no secret and with a digital currency the transactions may just end up simplified and multiplied, which shall further and eventually result in the creation of more capital, thus giving a massive push to our economy. Being called the first digital currency of the nation and aimed at creating an additional option to use money and it isn’t very different from the currently-issued banknotes; only that the digital rupee is expected to be transacted digitally and thus facilitate ease of use.

How will you benefit from this?

There are various expected benefits of the digital currency which has been rolled out. Few of the benefits can be listed as:

· With the introduction of blockchain technology in the mainstream, the digital rupee is set to increase efficiency and transparency.

· The use of digital rupee is also set to enable real-time transaction tracking which will further simplify the process of ledger maintenance.

· The payment system is expected to be active 24X7 and for all days over the year. The same shall be available for wholesale and retail customers alike.

· It shall enable the Indian buyers and customers to make online payment of digital currency without the requirement of a middleman.

· It is expected to reduce the intermediaries, and resultantly, the average transaction cost.

· Users will not be required to mandatorily open a bank account to transact in digital money, hence increasing the scope of online payments.

· The benefits of simplified and quick cross border transactions is a major benefit of digital currencies. As the e₹-R is being backed by the RBI, there will not be any threats of volatility


The e₹-R is the RBI’s accepted version of cryptocurrencies, which the central bank has dismissed repeatedly and called a serious challenge to the stability of the financial system of the country. It is aimed at creating an additional option to use money which is not very different from the currently issued banknotes, except for the ease of use. It's only fair to form more opinions and follow the growth of our very own digital currency once the pilot project rolled by the RBI comes to its conclusion.

The content of this article is for information purpose only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that the Author / Treelife is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.

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