What is Digital Rupee (e₹)?

Digital Rupee (e₹) is a Central Backed Digital Currency (CBDC) which is similar to regular currency notes issued by the RBI but in electronic form.

As part of its digital currency pilot program, the Reserve Bank of India will introduce the central bank digital currency (CBDC), a form of legal tender based on a digital model. A digital currency such as this serves as a store of value and payment method and is exchangeable with existing currencies.

Despite its similarity to banknotes, the CBDC aims to create another way to use money. The purpose of digital rupee transfers and storage is not to replace banknotes but to simplify them. Digital payments have been highly supported by the Indian government and RBI, with the launch of BHIM and UPI and implementation in practically every retail store.

A new digital currency set by the Reserve Bank of India, the Digital Rupee, was introduced on November 1st 2022. It is the world’s most recent digital currency. Cashless economics are becoming more viable, and electronics are becoming a currency.

RBI press release dated November 29, 2022, highlights several points regarding the Digital Rupee pilot program.

  • This pilot will cover customers and merchants in the closed user group.
  • E-rupees are digital tokens representing legal tender and denominating in the same way as paper money and coins. These will be distributed through banks as intermediaries.
  • Banks participating in the program will offer their customers mobile wallets.
  • People to persons (P2P) and people to merchants (P2M) can make payments by QR codes displayed at merchant locations.
  • The e₹ would incorporate the trust, safety, and finality of physical cash.
  • It can be converted into other forms of money, such as bank deposits, but does not earn interest.
  • This pilot project will determine whether the digital rupee is stable when created, distributed, and used at retail

The digital rupee wholesale will be going to test with nine banks

A release from the RBI lists the nine banks as State Bank of India (SBI), Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC Bank, and HSBC.

Are we really in need of the digital rupee?

  • India aimed to create a digital rupee to compete with virtual currencies and capitalize on the growing importance of cryptocurrencies.
  • RBI has repeatedly warned about the adverse implications of digital assets on the country’s macroeconomic stability. The rapid growth of cryptocurrency lately has been a challenge to financial stability.
  • According to RBI, during the period April 1st 2021 to March 31st 2022, 4,984.80 crores rupees were spent on security printing, up from 4,012.10 crores on July 1st, 2020 to March 31st 2021.
  • India’s average growth in digital payments over the last five years has been 55%, demonstrating a growing demand for a cashless economy, with digital currency expected to eventually reduce the cost of printing and dependency on physical cash.
  • E-rupee addresses the need for a risk-free, universally accepted digital currency.

What is Cryptocurrency, and How Does It Work?

What is Cryptocurrency, and How Does It Work?The term cryptocurrency refers to a digital currency that relies on encryption algorithms, making it money and a basis for virtual accounting. Virtual accounting is done through the use of cryptocurrencies. To hold cryptocurrency, you have to have a cryptocurrency wallet.

Cryptocurrency is a digital asset purchased from a currency owner and exchange platform or sold to another individual and stored in digital wallets, whether cold or hot.

Like UPI transactions, you can send and receive digital currencies with your smartphone. You can also convert your digital assets to cash using P2P applications or your bank account.

A cryptocurrency is an autonomous digital asset not subject to a central authority or government interference. However, they have had an uneasy relationship with the Indian government.

The question is, is the digital rupee new cryptocurrency for India? I’ll explain.

Digital Rupee vs Cryptocurrency

What is the difference between Digital Rupee vs Cryptocurrency

RBI defines a CBDC as a legal tender issued in digital form by a central bank. It is equal to fiat currency and can exchange one-to-one.

There are some differences between CBDCs and cryptocurrencies, but the two are more closely related.

According to the RBI announcement, “CBDCs are not financial instruments, commodities, or claims upon commodities and digital assets. Cryptocurrencies lack issuers and cannot classify as money.

This digital form of paper money issued by central banks like the Reserve Bank of India should be exchangeable with cash. The digital rupee has the same function as the commonly referred to digital, but it will not be a decentralized asset like cryptocurrencies. It will be issued and administrated by the central banks.

Digital rupees are legal tender, so when the RBI starts circulating them, all Indian citizens will be able to use them. These include digital wallets, NEFT, and IMPS.

What are two types of CBDC:

Despite its similarities to physical currency, digital money falls into primarily of two types.

CBDC-R (retail): CBDC-R is available to the general public.

CBDC-W (wholesale): CBDC-W in the wholesale market offer limited access to select financial institutions.

In what way is CBDC managed?

CBDCs will go to manage under two models:

  1. Model 1 (Direct Model)

    – In this model, the central bank manages every aspect of the CBDC system.

  2. Model 2 (Indirect Model)

    – In this model, the central bank issues CBDC indirectly (through banks and other intermediaries) to end customers.

In what ways does the Digital Rupee benefit to Indian economy?

  • Several benefits can be expected, including an increase in currency velocity due to the new Digital Rupee issued by the Reserve Bank of India as part of a larger money supply. It will reduce transaction costs and increase efficiency.
  • Lower paper currency demand will reduce the cost of printing new currency. The role of cryptocurrencies will also be affected by the growth of the RBI’s digital currency in circulation.
  • Digital currencies will further improve the distribution of funds in the economy, reducing cash dependence. Tracking the use of funds in a digital currency can help evolve improved and modified banking products and services.
  • It provides policymakers with real-time visibility and insights into the economy and will improve cost-effectiveness and efficiency in many ways.


A digital rupee doesn’t require an intermediary to facilitate online transactions and will rely on blockchain technology, with RBI acting as guarantor. The digital rupee will add another legal currency to circulation.

Incorporating digital currencies into payment processes will improve the resiliency and efficiency of payments and financial inclusion.


Can I invest in e₹?

Digital Rupee (e₹) is not an instrument which would earn you any interest on deposit. It is simply in the form of electronic cash that u can use to transact.

How digital rupee is different from Cryptocurrencies?

Cryptocurrencies are based on blockchain technology where each transaction is publicly recorded for anyone to see. Digital rupee though said to be based on blockchain technology, records of any transaction will not be publicly available.

Who would provide me Digital Rupee (e₹) initially?

You can buy digital currencies from selected banks even if u don’t have an account with them. It would be much like cash withdrawal from your bank account where instead of receiving cash, banks would credit your digital rupee (e₹) wallets and you’ll be good to transact it like traditional cash.

What’s digital rupee advantages for public at large?

You can buy digital currencies from selected banks even if u don’t have an account with them. It would be much like cash withdrawal from your bank account where instead of receiving cash, banks would credit your digital rupee (e₹) wallets and you’ll be good to transact it like traditional cash.

What’s the differences between the CBDC and UPI?

The key differences between the CBDC and UPI, RBI mentioned that e-rupee transactions will not have any intermediary, unlike UPI transactions, which is the prime difference


The author writes about fintech, banking, and future of SAAS services. He works as an SEO analyst at Easebuzz, so if you're looking for an account that tracks India's fintech scene, you should check out his Easebuzz blog.