What Is the Digital Rupee? All You Need To Know About It

  • Published on: 18 Dec 2023
What Is the Digital Rupee? All You Need To Know About It

RBI launched Digital Rupee officially as a legal tender for the wholesale segment on December 1, 2022. Taking another step towards the ‘Digital India’ initiative, the new digital currency of India is exchangeable with paper currency. 

Also referred to as the Central Bank Digital Currency (CBDC), this helps the country head towards a cashless economy. This was a welcome move as most people prefer digital payments with the Unified Payments Interface (UPI). 

However, various attributes of the Digital Rupee make it different from UPI payments. For instance, this new form of payment functions using a secure and fast payment blockchain technology similar to cryptocurrency. 

Here’s all you need to know about the digital currency of India, its working process, how it differs from cryptocurrency, its benefits and more. 

What is the Digital Rupee?

The Reserve Bank of India launched the digital currency in a phased manner. In the pilot phase, four banks recognised and issued this currency. These banks include:

  • SBI
  • YES Bank
  • IDFC First Bank
  • ICICI Bank

In the next phase, the following banks started issuing the currency:

  • Bank of Baroda
  • Kotak Mahindra Bank
  • HDFC Bank
  • Union Bank of India

Simply put, Digital Rupee is the legal currency of India you get in an electronic format. Know that this has the same domination as your physical cash. So, you can opt for CBDC in several values of the legal tenders: ₹1, ₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹200 and so on. Furthermore, transferring digital currency from one digital wallet to another is only possible, which helps improves its security feature with a QR code. 

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How Does Digital Rupee Work? 

To use digital currency, the foremost thing you need to do is to download and register for a digital wallet. After registering, simply purchase the CBDC from the issuing banks and store it in your digital wallet. That’s all.

You can transfer funds to individuals or merchants via a QR code using the digital currency, just like you initiate UPI payments from your bank account. However, this is only possible if the recipient also has a digital wallet for CBDC. It doesn’t attract any interest and you can convert it into various forms, such as opening a deposit, transferring to your bank account and much more.

Digital Currency vs Cryptocurrency

The Reserve Bank of India regulates the digital currency of India and acknowledges it as a sovereign currency. However, it functions like a cryptocurrency, as both depend on blockchain technology and enables contactless transactions. That’s not all. There are specific differences, too. 

Firstly, CBDC, the digital currency of India is a centralised currency, while crypto is not. This means there is no regulating body or central authority for crypto while the RBI regulates CBDC. Secondly, CBDC is a legal tender which can replace physical currency. 

The value of cryptocurrencies also fluctuates as per the demand and supply factors. On the other hand, CBDC has fixed dominations, with the Government of India exercising complete control over its monetary value.

Advantages of Digital Rupee

Now that you know how the digital currency of India works, here are its benefits. 

  • It is faster and more secure for digital payments
  • The cost per transaction is less
  • You can easily convert your bank deposits into CBDC and vice versa 
  • It is protected against all types of damages, unlike physical currency
  • Offers better protection against fraud and theft as there’s no third-party involvement
  • It cuts the cost incurred in producing physical cash, helping the government channelise the allocated budget for other developmental plans 

Switching from physical currency towards digital currency will also help improve the economic climate of the country. That said, once the Central Bank Digital Currency gets embedded in India’s currency system, fund transfers will become safer, faster and more cost-efficient. If you are looking for a safer way to transact other than digital currency, you can get the Fibe Axis Bank Credit Card

This is a numberless credit card and therefore, offers better security for online transactions. You can also link it to a third-party UPI app and make seamless payments. What’s more, you get to earn cashback of up to 3% on every transaction and enjoy numerous exciting benefits, too. 

These perks include zero annual or renewal fees, complimentary lounge access and much more. Download our Personal Loan App or visit our website to apply for a credit card today! 

FAQs on Digital Rupee

What is digital rupee, and how does it work?

Digital rupee is an RBI-backed digital currency with the same denomination as a legal tender. Similar to cryptocurrency, you must purchase the currency and then you can initiate transfers like UPI transactions. 

How is UPI different from Digital Rupee?

The primary difference between UPI and Digital Rupee is centralisation, as the latter is regulated by the RBI. UPI comes under NPCI (National Payments Corporation of India) and has links with all decentralised platforms that allow fund transfer. 

What is the benefit of Digital Rupee?

Digital currency reduces the chances of theft, loss or damage compared to a physical currency. It also minimises the cost of issuing money, which can help boost the economy. 

What is the Digital Rupee in India? 

The Digital Rupee or Central Bank Digital Currency (CBDC) is a legal tender issued by the RBI, which is exchangeable with paper currency.


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