Explained: 5 Ways In Which Reserve Bank Of India¡¯s Digital Rupee (e?) Is Different From UPI

It's been over a month since the Reserve Bank of India launched the first pilot project for retail digital rupee (e?) on December 1, 2022. Before that, the RBI had launched the first pilot project of the digital rupee for the wholesale segment on November 1, 2022.

But it seems that the adoption and success of the digital rupee may take some more time. Last month, it was reported that several bankers had mentioned that UPI and net banking are the main challenges for e-rupee, as both are already present and users are satisfied with them.

Amidst this, how E-Rupee creates space for itself is what remains to be seen.

shutterstock

Introduced in 2016, i.e., the year of demonetization, UPI has become immensely popular in India. But with the RBI pushing users to try and adopt e-rupee as well, it's important to understand the difference between the two.

After all, understanding how e-Rupee is different from the existing popular payment option of UPI can turn out to be helpful for users.

1. The e-Rupee is legal tender, whereas UPI is a payment medium

One of the biggest differences between e-Rupee and UPI is that e-Rupee itself is a currency in digital form and a legal tender that enables digital transactions, whereas UPI is only a platform through which transactions happen digitally.

Also Read: How A Migrant Fruit Seller Became A Part Of RBI's Digital Rupee Project

2. Banks are not required as intermediaries for e-Rupee

Digital transactions in UPI or through internet-based banking methods such as NEFT or RTGS must go through a bank, while in the case of the e-Rupee, the money gets transferred from one digital wallet to another.

Clarifying the difference between the digital rupee and UPI, RBI Governor Shaktikanta Das said during a press conference last month, "Any UPI transaction involves intermediation of the bank...In CBDC, just as the paper currency you go to a bank, draw currency and keep it in your purse, you go to a shop and pay from your wallet... similarly, here also you can draw digital currency and keep it in your wallet which will be your in mobile phone... and when you go and make a payment in a shop or to another individual, it will move from your wallet to his wallet... there is no routing or intermediation of the bank."

my big plunge

3. The e-Rupee is not limited to just currency

The usage of the e-Rupee is not limited to payments because it is a type of currency. The e-rupee also serves the purpose of being a "unit of account" and a "store of value." Whereas UPI is more like an overlay infrastructure on top of any form of store of value, like bank accounts (which have normal currency), prepaid instruments, credit cards, etc.

Also Read: RBI Proposes Linking Credit Cards To UPI

4. e-Rupee transactions bring more anonymity

According to the ET report, e-rupee transactions are more anonymous than other digital transactions, such as UPI, NEFT, and RTGS, as mentioned by experts. "The fundamental feature of cash is anonymity. So for anonymity purposes currency can be used. How anonymity will be ensured in the case of the digital rupee can have various suggestions... we are firstly looking at largely the technological solutions. It is also possible to get a legal provision to ensure anonymity," RBI deputy governor T Rabi Sankar had said earlier.

As per the report, in the case of e-Rupee, although the transactions are recorded in the central ledger, they are pretty much anonymous, as the owners of the wallets are not known to the government or intermediaries in the ecosystem. Whereas in the case of UPI or other modes like NEFT or RTGS, the transaction happens between the two bank accounts, and it can be easily tracked.

Ultimately, UPI transactions are all linked back to the bank account and can be tracked by the regulatory intermediaries in the banking/financial system.

5. e-Rupee transactions require PAN after a certain limit

At present, a person making a cash transaction above a certain threshold needs to submit his or her PAN. The same rule applies to e-rupee.

indiatimes

As per current rules, last year in May, CBDT made it mandatory for people to quote their PAN card or Aadhaar card number for withdrawals or deposits of ? 20 lakh or more from bank accounts, including current accounts, cooperative banks, and post offices, in a financial year. A PAN card number is also required when depositing more than ? 50,000 in a single day.

As far as UPI transactions are concerned, there isn't a requirement to present or input PAN details above a particular threshold amount.

"There is no difference between paper currency and digital currency. The income tax department has got certain limits for cash payments like beyond a certain limit you have to give PAN number; the same rules will apply in the case of CBDC because both are currencies," RBI governor Das had added.

For the latest and interesting financial news, keep reading Indiatimes Worth. Click here