Background

• In 2022, the Reserve Bank of India launched the Digital Rupee or e₹ on a pilot basis. 
• It is part of the broad initiative by the Indian government and the RBI to modernise the financial system and enhance financial inclusion while promoting the use of digital currency over physical cash. 
• Currently, users and merchants of identified pilot banks and non-banks across the country can use e₹ by downloading the respective e₹ app.

What is e₹?

• e₹ is India’s Central Bank Digital Currency (CBDC). It is the digital form of India’s physical currency, the Rupee (₹). 

• e₹ is issued by RBI in digital form and offers features similar to physical cash like convenience of use, guarantee of RBI, finality of settlement, etc. 
• e₹ is stored in the user’s digital wallet and can be used to receive / send money, and / or make payment for transactions, just like any physical ₹ note.

• e₹, being a digital form of the ₹ bank note, is legal tender and is the liability of the Reserve Bank of India.

Difference between e₹ and UPI:

• e₹ is a digital form of ₹ whereas UPI is a means of payment. 
• In addition to being used for payments, e₹ also serves as a ‘store of value’, i.e., e₹ can be withdrawn from one’s bank account and kept separately in the e₹ wallet.

Programmability feature of e₹:

• The programmability feature allows the sponsor entity (government / corporate) or user to ensure that the funds in the CBDC wallets are used for a specific, designated purpose. 
• It can be programmed on different parameters like expiry date, geo-location, merchant category codes, merchant VPA, etc. 

Potential benefits of e₹:

• e₹ has the potential to transform the settlement systems for financial transactions and make them more efficient and secure. 
• It leverages on the programmability feature of the platform and reduces settlement risk.