Home / Opinion / Quick Edit /  E-rupee launch

Come 1 December, India will take its boldest step yet in the launch of an e-rupee. The first pilot of the retail version of our central bank digital currency (CBDC) will be flagged off by the Reserve Bank of India (RBI). This trial will be conducted in select locations among closed user groups, with participating customers and merchants doing transactions with it. As per the plan, prospective shoppers will have digital wallets offered by banks, and they’ll be able to pay merchants by scanning QR codes. This is how Unified Payments Interface (UPI) apps work. But the difference is significant. While UPI apps move money from one bank account to another, an e-rupee is a direct liability of RBI, which means its value is not dependent on the solvency of an institution that could, in theory, fail. In contrast with money held in a regular bank, e-rupee holdings will be fully safe. It’s a tribute to our banking system that money in banks is rarely seen as being at risk. Herein lies an irony. Our e-rupee will have to be promoted without alarming people about that risk gap. The financially savvy, though, know that a CBDC’s lack of interest earnings is the only reason not to shift all bank balances into it.

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