Home / Industry / Banking /  How is the digital rupee different from UPI payments?

CBDC is a digital or virtual currency. Finance Minister Nirmala Sitharaman, while presenting Union Budget 2022-23 on February 1, had announced that Digital Rupee or Central Bank Digital Currency (CBDC) would be issued by the RBI in the coming fiscal year. 

So, when the digital rupee will come in place, how will it be different from UPI payments? We talked to some experts to know the same.

How will be the digital Rupee different from UPI payments?

Digital Rupee in itself will be the underlying payment mode that can be used for digital payments in lieu of currency/cash. “The payment rails like UPI, IMPS etc use the underlying currency/cash to transfer the funds. In this case, it is expected that payment rails will work together with the digital rupee to ensure a seamless payment transaction," said Mihir Gandhi, Partner & Payments Transformation Leader, PwC India.

Currently, UPI payments are made using the digital equivalent of existing currency notes. That means every rupee transferred via UPI is backed by physical currency. “The digital rupee will be legal tender in and of itself and need not necessarily be backed up by physical currency," said Sumit Gwalani, Co-Founder, Neobank Fi.

Each bank has a different UPI handler

The digital rupee is no different from your normal rupee it can be used to do normal transactions like NEFT, UPI. The digital rupee will be operated by RBI and not by bank intermediaries in the case of UPI where each bank has a different UPI handler, said Manoj Dalmia, Founder and Director, Proassetz Exchange

UPI payments currently rely on the settlement of the transacting banks with the RBI, Digital Ruppe will be transacting directly from RBI, hence it will be settled instantly, said Vinshu Gupta, Founder and Director, Nonceblox Blockchain Studio.


Sangeeta Ojha

Sangeeta is a Chief Content Producer at Livemint. Writes on personal finance, banking and real estate. She has over 12 years of experience as a journalist with television and digital media
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