India’s e-Rupee: A Digital Leap Forward or a Step Behind UPI?

India’s e-rupee, launched by the Reserve Bank of India (RBI) with fintech partners MobiKwik and Cred, aims to revolutionize the digital economy, but faces challenges competing with the established Unified Payments Interface (UPI).

• RBI launches e-rupee with MobiKwik and Cred.
• E-rupee aims to reduce cash dependency.
• Challenges in adoption amidst UPI’s dominance.

What is the e-Rupee?

The e-rupee is India’s Central Bank Digital Currency (CBDC), a digital form of the Indian rupee issued and backed by the RBI. This digital currency aims to complement physical cash and promote digital transactions. The RBI, in collaboration with fintech platforms MobiKwik and Cred, as well as Yes Bank, has rolled out e-rupee wallets to facilitate its use. MobiKwik has made its e-rupee wallet available to all Android users, while Cred is testing the waters with a beta version offered to a select group.

Integration with UPI

The e-rupee integrates seamlessly with India’s widely used payment system, the Unified Payments Interface (UPI), which allows instant money transfers between bank accounts via mobile devices. This integration enables e-rupee users to make both peer-to-peer (P2P) and peer-to-merchant (P2M) transactions by scanning UPI QR codes. It’s like giving the e-rupee a VIP pass to UPI’s bustling party, but can it dance to the same beat?

Adoption and Limits

MobiKwik’s e-rupee wallet comes with a daily transaction limit of Rs 50,000 ($576) and a per transaction cap at Rs 10,000 ($115). Think of it as a digital wallet with a daily withdrawal limit, similar to your ATM card, but for digital currency. Despite these limits, adoption has been slow. The e-rupee’s circulation grew from 1 billion rupees in December 2023 to 3.23 billion rupees by May 2024, yet it remains a drop in the ocean compared to the 35.4 trillion rupees in banknotes circulating in India.

Progress and Challenges

The RBI’s journey with the e-rupee began with a pilot in the wholesale segment in November 2022, followed by a retail rollout in December. While the increase in circulation is notable, the e-rupee’s struggle for mainstream acceptance is evident. The International Monetary Fund (IMF) observed,

“In India, the digital rupee pilot has yet to achieve mainstream adoption among India’s vast population, especially in the presence of the widely adopted Unified Payments Interface (UPI). As of May 2024, the e-rupee in circulation stood at 3.23 billion rupees, up from 1 billion rupees in December 2023. However, this remains a small fraction of the 35.4 trillion rupees in banknotes currently in circulation.”

The e-rupee is the new kid on the block, but it’s got some big shoes to fill.

Future Prospects

The RBI is not resting on its laurels. Their statement reads,

“CBDC pilots in the retail and wholesale segments are underway with more use-cases and more participating banks. Continuing with this approach, it is proposed to make CBDC-retail accessible to a broader segment of users in a sustained manner, by enabling non-bank payment system operators to offer CBDC wallet.”

They’re also looking to push boundaries, as another statement suggests,

“This is expected to enhance access and expand choices available to users apart from testing the resiliency of the CBDC platform to handle multi-channel transactions. Necessary changes will be made to the system to facilitate this.”

The RBI aims to enhance the e-rupee’s adoption by integrating it with existing digital payment systems and exploring innovative use cases like cross-border transactions and programmable money.

Bipin Preet Singh, co-founder of MobiKwik, is optimistic about the e-rupee’s potential, stating,

“We expect that CBDC will make the Indian rupee digital and further expand the digital economy. E-rupee transfers can be made to anyone with an e-rupee wallet or UPI ID. Our goal is to drive the adoption of e-rupee in India and move towards a less cash economy.”

However, skeptics like SS Mundra, former RBI Deputy Governor, question its necessity, pointing out that UPI already fills many of the same roles.

While the e-rupee promises benefits like reduced costs for banks and enhanced financial inclusion, particularly in rural areas, there are valid concerns about privacy and government control over digital transactions. The programmability of the e-rupee could lead to innovative use cases, such as conditional subsidies or restricted spending, but similar functionalities are already possible with UPI and closed-loop wallets. Is the e-rupee truly a game-changer, or just another player in the crowded digital payment field?

Key Questions and Takeaways

• What is the e-rupee and who introduced it?

  The e-rupee is India’s Central Bank Digital Currency (CBDC), introduced by the Reserve Bank of India (RBI) in partnership with MobiKwik, Cred, and Yes Bank.

• How does the e-rupee integrate with existing payment systems in India?

  The e-rupee integrates with UPI, enabling P2P and P2M transactions through UPI QR codes.

• What are the transaction limits for MobiKwik’s e-rupee wallet?

  MobiKwik’s e-rupee wallet has a daily limit of Rs 50,000 ($576) and a per transaction limit of Rs 10,000 ($115).

• How has the e-rupee’s adoption progressed in India?

  Adoption has been slow, with circulation growing from 1 billion rupees in December 2023 to 3.23 billion rupees by May 2024, a small fraction compared to banknotes.

• What steps has the RBI taken to enhance the e-rupee’s adoption?

  The RBI has allowed non-bank payment operators to offer e-rupee transactions, integrated it with UPI, and is exploring new use cases like cross-border transactions.