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Explained: Is the Digital rupee future of money? Will it successfully boost the Indian economy?

The e-rupee is a virtual currency that simplifies, speeds up, and reduces the cost of making payments. It will facilitate frictionless digital transactions in electronic format. Users can pay directly, saving money on transaction fees.

Explained: Is the Digital rupee future of money? Will it successfully boost the Indian economy?

New Delhi: The Reserve Bank of India (RBI) launched India's first digital rupee pilot project for the wholesale sector on November 1 in a historic move. RBI said, on the retail side, a comparable trial will shortly begin. The Central Bank Digital Currency is another name for the digital rupee. It is a computerised representation of RBI cash notes.

What is Digital Rupee/ Central bank Digital Currency?

The e-rupee is a virtual currency that simplifies, speeds up, and reduces the cost of making payments. It will facilitate frictionless digital transactions in electronic format. Users can pay directly, saving money on transaction fees.

Digital currency can be exchanged for money equivalent to paper notes because the CBDC is freely convertible against real money. To use e-rupees, unlike UPI, a customer does not require a bank account.

What RBI says?

The introduction of the digital rupee is being hailed as a significant step in India's digital revolution. It will significantly alter how business is conducted. The regulator stated in a notification on October 31, 2022, "The use case for this pilot is the settlement of secondary market transactions in government securities." (Also Read: 

According to RBI governor Shaktikanta Das, "there would be some technical hurdles and certain process challenges. The RBI will seek to iron out all those things and introduce the CBDC in a non-disruptive way."

Which banks are chosen to take part in this project?

Nine banks including the State Bank of India, the Bank of Baroda, the Union Bank of India, the HDFC Bank, the ICICI Bank, the Kotak Mahindra Bank, the YES Bank, the IDFC First Bank, and HSBC have been chosen to take part in the wholesale digital rupee pilot project.

How Digital Currency will benefit India?

According to the RBI, the digital rupee system will "support India's digital economy, improve financial inclusion, and improve the effectiveness of the monetary and payment systems." Cross-border transactions will increase and physical cash management costs will be significantly reduced, which will make running a bank's cash management and operations much simpler.

Is the Digital Currency future of money?

As the future of commerce is a cashless one, experts are anticipating the digital rupees will stand out in the future's needs. Digital currency will always have a lifeline because it cannot be physically lost or damaged. The hazards of Bitcoin volatility will be reduced.

The e-rupee will also reduce the operating costs associated with producing, distributing, and storing banknotes. The e-rupee can be extremely helpful in preserving the environment because it will lessen the need for paper. 

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