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UPI and e-Rupee: Transforming India's Digital Currency Lands



  Aug 21, 2023

UPI and e-Rupee: Shaping India's Digital Money Scene


The Rise of UPI and the Emergence of e-Rupee in India's Digital Economy
 
Introduction: Unified Payments Interface (UPI), a homegrown digital payment system, has gained widespread acceptance both domestically and internationally. As UPI continues to thrive, the Central Bank Digital Currency (CBDC) of India, known as e-Rupee, has also entered the scene. This article explores the coexistence of UPI and e-Rupee, highlighting their significance and potential impact on India's economy.
 
Growing Acceptance of UPI: UPI has achieved popularity beyond India's borders, with countries like France adopting it for digital transactions. Several nations have signed agreements with India to implement UPI-based payments. This trend not only aids digital payments but also facilitates remittances, lowering transaction costs.
 
The Emergence of e-Rupee: e-Rupee, India's Central Bank Digital Currency, was introduced as a pilot in November 2022. Initially positioned as an alternative to UPI, its introduction sparked debates about the need for a new digital currency alongside an already successful UPI system.
 
Coexistence and Evolution: Despite concerns, e-Rupee and UPI have been coexisting harmoniously. e-Rupee's adoption rate has grown, mainly due to adjustments in its design. The challenge of interoperability between e-Rupee and UPI has been addressed, ensuring smooth integration at both the front and back ends.
 
Anonymity and Design Tweaks: Recognizing the preference for cash due to anonymity, e-Rupee has been designed to offer a certain level of anonymity. Transactions below a specific value will be as private as cash transactions, enhancing user privacy. Unlike UPI, e-Rupee is akin to physical cash and is the liability of the central bank.
 
Advantages and Possibilities of e-Rupee: e-Rupee offers unique advantages, including the ability to program money for specific purposes. For instance, subsidies and scholarships can be distributed as e-Rupee vouchers redeemable only at designated places, minimizing leaks and ensuring targeted benefits. e-Rupee also functions offline, making it more versatile.
 
Positioning e-Rupee: While UPI has been a significant player in India's fintech and cashless economy journey, e-Rupee has the potential to lead the way forward. Its internationalization could yield substantial benefits, reducing the cost of printing and distributing physical currency.
 
Conclusion: As UPI's success continues, the emergence of e-Rupee presents new avenues for India's digital economy. The coexistence of these two digital payment systems offers diverse benefits, from user privacy to targeted benefit distribution. While UPI has established its place, e-Rupee has the potential to drive the economy's next phase, emphasizing innovation and efficiency.


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