[alpha1]

https://www.rbi.org.in/Scripts/BS_Pr...spx?prid=54773

Couldn't find much details about the "e-Rupee" initiative by the RBI/GOI on the team-bhp forums; e-Rupee has got released as a pilot starting from today.

The e₹-R would be in the form of a digital token that represents legal tender. It would be issued in the same denominations that paper currency and coins are currently issued. It would be distributed through intermediaries, i.e., banks. Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones / devices. Transactions can be both Person to Person (P2P) and Person to Merchant (P2M). Payments to merchants can be made using QR codes displayed at merchant locations. The e₹-R would offer features of physical cash like trust, safety and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks

So far, nothing changes for me as a user of this tool. For immediate transactions purpose I have UPI/IMPS, for storage I have bank accounts. In fact, the money I park in the bank at least offers some piddly interest rate, this eRupee wallet will offer none.

Can someone from the Indian banking infra explain why I should be happy about this? What are the technicalities that make it superior to the existing systems?

[PreludeSH]

This is not like distributed crypto currency. Should be centralized and controlled by RBI. Looks like a good concept. Its useful from RBI or govt's point of view in that they dont have to print money. Will it also help in controlling/tracking if everything is through banks and tokens ? Has to be a bank involved as intermediary.
Haven't seen exactly how it works though.

[Turbohead]

If this is based on block chain technology and the govt plans to eventually phase out physical currency, then there will never be a concept of black money. With block chain, all transactions will be tracked.

Is it really useful? Yes, if it's implemented properly. But honestly, I can't imagine how politicians, govt contractors etc can honestly accept such a future, specifically the corrupt kind.

[am1m]

Originally Posted by Turbohead

...and the govt plans to eventually phase out physical currency, then there will never be a concept of black money. With block chain, all transactions will be tracked.

If that is indeed the case, then can't the same be achieved by just phasing out physical currency gradually and ramping up digital payments? Those are also tracked on each payment app without needing block chain or a digital rupee. What am I missing here?

(Also, physical currency being phased out, I really don't see that happening anytime soon- not because those in power who need to indulge in corrupt practices will resist, but because the majority of the country still prefers cash transactions I think, I remember reading 72% of all consumer transactions are still cash- though that might be changing slowly.)

Another point I just read is that the digital currency in banks won't generate any interest (also highlighted in the opening post). So am wondering what the use case really is. I'm sure I'm missing something here, but I don't see the point for this.

[mayuresh]

Originally Posted by am1m

If that is indeed the case, then can't the same be achieved by just phasing out physical currency gradually and ramping up digital payments? Those are also tracked on each payment app without needing block chain or a digital rupee. What am I missing here?

Many bankers seem to share this view here:

https://www.business-standard.com/ar...0100811_1.html

Seven bankers told Reuters that using the e-rupee of the Reserve Bank of India (RBI) was much the same as internet-based banking that users were already satisfied with.

[Samfromindia]

Originally Posted by PreludeSH

This is not like distributed crypto currency. Should be centralized and controlled by RBI.

These are called CBDC.(Central Bank Digital Currency)

A side by side comparison is nicely explained here:

https://youtu.be/Vb1Y760Sazc

[anandhsub]

A digital currency is a liability of the Govt ( technically central bank) while a deposit is of the bank. Banks create deposits out of thin air each time they make a loan while a Central Bank is backed fully by the Govt of India.

Hence those paranoid about banks going bust can park their cash in digital currencies instead of hoarding physical cash. Otherwise I don't see much of an use case.

[Rajeevraj]

Originally Posted by alpha1

[
So far, nothing changes for me as a user of this tool. For immediate transactions purpose I have UPI/IMPS, for storage I have bank accounts. In fact, the money I park in the bank at least offers some piddly interest rate, this eRupee wallet will offer none.

Can someone from the Indian banking infra explain why I should be happy about this? What are the technicalities that make it superior to the existing systems?

I was also trying to understand this and got the below basic understanding.

• It is an exact 1: 1 digital mapping of paper currency. Instead of keeping paper money, you keep digital notes in a wallet. The denominations are exactly as paper notes.
  
• A bank account is not needed for using and managing digital rupee. This means more digital financial inclusion. This is the biggest difference with other digital means. Today I can pay digitally only if the receiptant has a digital presence. With eRupee, that is not needed.
  
• For RBI, increases efficiency in managing money including printing costs. I read 100s of crores are spent to print money itself.
  
• Better traceability as every digital note can be tracked.
  
• If paranoid about banks going down, one can hold a lot more money digitally.

[Naetik30]

Originally Posted by mayuresh

Many bankers seem to share this view here:

https://www.business-standard.com/ar...0100811_1.html

Not true. For regular digital payments, you need a bank account. Any transaction you make is not anonymous.

The main advantage for the user is anonymity with the new e-rupee technology. As for the RBI and government, they save on actually printing the physical money.

[ImranHyd]

Originally Posted by Naetik30

Not true. For regular digital payments, you need a bank account. Any transaction you make is not anonymous.

The main advantage for the user is anonymity with the new e-rupee technology. As for the RBI and government, they save on actually printing the physical money.

Any idea how anonymity will be maintained? Any digital transaction will leave a trail. As per this article, RBI is asking banks to not report low value transactions. Otherwise, banks are aware of all the transactions using digital currency.

IMHO none of the big players of cash will ever move to this currency format. Just like UPI, this may be used only for low value transactions.

[Naetik30]

Originally Posted by ImranHyd

Any idea how anonymity will be maintained? Any digital transaction will leave a trail. As per this article, RBI is asking banks to not report low value transactions. Otherwise, banks are aware of all the transactions using digital currency.

IMHO none of the big players of cash will ever move to this currency format. Just like UPI, this may be used only for low value transactions.

Although the actual processes for anonymity of transaction are being worked out, the outline is something like this -
1. The first transaction of the user purchasing the erupee from a bank will be tracked. i.e. the money entering the wallet.
2. There after the money going out of the wallet will not be tracked by banks (or) reported back to RBI - of course as long as it is within some limits (like INR 50000 for which PAN is not required to be quoted).
3. So, if you receive e rupee from someone (not from the banks) how you got it will not be tracked.

[mayuresh]

Originally Posted by Naetik30

Not true. For regular digital payments, you need a bank account. Any transaction you make is not anonymous.

The main advantage for the user is anonymity with the new e-rupee technology. As for the RBI and government, they save on actually printing the physical money.

There may be specific use cases for people wanting anonymous transactions and (for sake of argument) govt - if it's going to reduce printing of cash.

But what these 7 bankers are saying (link in my last post) is why common people aren't so excited about it - those who don't care about anonymity and are oblivious to currency printing expenses. I'd believe this forms a majority of "common people" who do not see much difference between (say) UPI and the new stuff.

May be if there is some usability difference (e.g. not requiring entering a PIN when making payments, etc, as the case may be) those will somewhat matter to common people. We'll come to know these in due course of time.

[Turbanator]

Originally Posted by Rajeevraj

A bank account is not needed for using and managing digital rupee. This means more digital financial inclusion. This is the biggest difference with other digital means. Today I can pay digitally only if the receiptant has a digital presence. With eRupee, that is not needed.

What you still need is an Electronic device, most likely with an internet connection (might work thru SMS, not sure), but still at least a phone.

I don't have any numbers to back up, but a lot of guys still don't have one or share in a family. This digital rupee tries to address a problem which is probably not there (UPI etc.) unless the Government completely wants to stop printing money.

In that case, I am all in. No physical money or at least not anything beyond a Rs 50 or even lower note

[gururajrv]

From what I think of personally;

1) Money is accounted for if it's in digital form. That is, government can look into the audit for any transaction a user initiates as against paper money wherein people use it to evade tax and get benefits out of it. This is a PLUS for the government in tracing money expenditure / exchange.

2) it reduces any form of robbery just thinking out of the box here. Robber cannot steal money unless he holds an account and forces the individual to transfer it!

3) Reduces / even eliminates corruption to an extent if paperless cash goes to be a hit.

I'm sure in future, everything will become digital and I don't have a good feeling about extensive reliance on internet for some weird reason!

[varunswnt]

1st Video explains Digital Currency for Retail customers like you and me by comparing it with UPI like transactions.

• Since salaries are credited to our bank accounts and not CBDC accounts, we will have to convert it to CBDC like we take out cash from ATM. I don't know how this will turn out, but if Utility payments (Gas, Electricity, Internet, Phone, Property tax, etc.) or EMIs can take this route then it might find some traction.
• Daily wage earners or small businesses/shops who get paid in cash won't see any change in their routine life.
• One immediate usage could be Political Donations if Financial cell of Political Parties immediately swing into action until Election Commission wakes up to take notice of it.

RBI Digital Rupee Pilot: How Retail CBDC Is Different From UPI | Explained

2nd Video explains Digital Currency for Wholesale customers like Financial Institutions. In my opinion, this use case is more relevant for its usage in terms of settlement and clearing processes where amount in millions are involved.

What Is e-Rupi? | How will RBI’S CBDC Pilot Digital Currency Change Things? | e-Rupee Explained