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Home >Industry >Banking >All you need to know about e-RUPI and its disruptive potential

Prime Minister Narendra Modi launched e-RUPI, a digital payment instrument, via videoconferencing on 2 August. It is slated to make welfare payments easier and more efficient, and to an extent looks like the precursor of a Central Bank Digital Currency (CBDC). Mint explains:

What is e-RUPI, and how does it work?

e-RUPI is a digital payment instrument developed by the National Payments Corporation of India (NPCI) on the Unified Payments Interface (UPI) platform. The recipient of e-RUPI can use this one-time payment mechanism to get access to a product or service without using a card, digital wallet, or net banking. The e-RUPI is a QR code or SMS string of numbers sent to the recipient’s mobile. It also ensures that the payment to the service provider is made only after the transaction is completed. As it is pre-paid in nature, it assures timely payment to the service provider without the involvement of any intermediary.

What will e-RUPI be used for?

The most immediate use of e-RUPI is for welfare payments and services related to health such as drugs and nutritional support under ‘mother and child’ welfare schemes and tuberculosis eradication schemes, as well as for drugs and diagnostics under the Pradhan Mantri Jan Arogya Yojana, and for fertilizer subsidies. e-RUPI connects the sponsors of the services with the beneficiaries and service providers in a digital manner without any physical interface or intermediary. It has been launched with the aim of ensuring that such payments are transferred to the beneficiary without any leakage or scope for corruption.

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Will e-RUPI be also used in the private sector?

Yes. A press release issued by the Centre outlined, apart from government use, private sector use for e-RUPI. The private sector can leverage these digital vouchers for their employee welfare and corporate social responsibility programmes. Several companies use instruments such as meal cards for benefits related to the workplace. These could be migrated to e-RUPI.

Is e-RUPI a cryptocurrency?

No. e-RUPI is not a cryptocurrency. A cryptocurrency is based on a blockchain and ownership is secured by private and public keys. e-RUPI does not use this type of technology. The Reserve Bank of India (RBI) is reportedly exploring a Central Bank Digital Currency (CBDC) for the country, but this is different from e-RUPI, which has been developed on the UPI. However, e-RUPI can be a step towards a CBDC. A major use case for a CBDC is welfare payments, which directly reach beneficiaries and do not suffer from leakages.

What is the status of CBDCs in the world?

Central banks across the world are working on their own crypto-currency. China is among the most advanced with public trials of its Digital Currency Electronic Payment. Smaller countries such as the Bahamas have launched CBDCs. In India, the high-level inter-ministerial committee set up to examine cryptocurrencies had recommended the introduction of a CBDC. RBI has also been exploring the pros and cons of introduction of CBDCs, which give central banks more control over monetary policy.

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