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  • 02 November, 2022

  • 6 Min Read

Digital Rupee

Digital Rupee

  • The first pilot in the Digital Rupee, Wholesale segment according to the Reserve Bank of India (RBI), will start on November 1st, 2022.
  • The first trial in the Digital Rupee - Retail category will debut in a month in a few key areas with closed user groups made up of consumers and retailers.

Describe Digital Rupee.

  • A digital version of currency notes produced by a central bank is known as a Central Bank Digital Currency (CBDC) or Digital Rupee.
  • It is a digital method of payment that supports contactless exchanges.
  • It is characterized as the Reserve Bank of India's legal tender.
  • Background: Finance Minister Nirmala Sitharaman stated that the Reserve Bank of India (RBI) would shortly launch its digital currency when presenting the Union Budget 2022.


There are two different types of CBDC.

  • Retail (CBDC-R): Retail CBDC might be accessible to everyone.
  • Wholesale (CBDC-W) is intended for specialised financial institutions with limited access.
  • Benefits include "supporting India's digital economy, enhancing financial inclusion, and improving the efficiency of the monetary and payment systems."
  • A digitised currency will lower transaction costs and make it simpler for governments to access all transactions taking place inside authorised networks.
  • In contrast to actual notes, a digital currency will have an infinite lifecycle. According to the CBDC, "CBDC is intended to supplement, rather than replace, present forms of money and is envisaged to provide an extra payment pathway to users, not to replace the existing payment systems."

Adoption of digital currency has risks

  • cyberthreats and hacks
  • invasion of privacy

Bitcoin versus digital currency: differences

  • A decentralized digital asset and medium of exchange based on blockchain technology is known as a cryptocurrency. It has, however, mostly generated controversy because of its decentralised character, which refers to its operation without the use of any middlemen like banks, financial organisations, or central governments.
  • On the other hand, the Reserve Bank of India (RBI) will issue Central Bank Digital Currency (CBDC) that would be accepted as legal cash online.
  • In that it would be backed by the government, the digital rupee will vary from Bitcoin, Ethereum, and other cryptocurrencies.
  • Second, the digital rupee will be similar to holding a physical rupee equivalent since it has intrinsic value due to government backing.

Future Possibilities

  • Future pilots will concentrate on other wholesale transactions and cross-border payments as a result of the lessons learned from this trial.
  • In order to create a CBDC ecosystem and ensure its sustainability, it is crucial to solve the current challenges and for CBDC to operate as an inclusionary tool by resolving the concerns through innovation

Source: The Hindu

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