The central bank digital currency (CBDC), or the eRupee, which was launched last year by the Reserve Bank of India (RBI) can’t be turned into cash or vice versa, currently. The RBI will only issue eRupee against bank deposits and permit conversion of digital currency into cash.
eRupee was launched by the central bank to act as a legal tender in digital form. It is same as the fiat currency and is exchangeable one-to-one with the fiat currency. The only difference it has is that it’s not like physical cash. eRupee is a fungible legal tender, for which holders do not need to have a bank account.
eRupee or CBDC will appear as a ‘liability’ (currency in circulation) on the RBI’s balance sheet.
According to the central bank, the eRupee pilot project has performed quite well in a closed-user group and its user base is gradually growing. While addressing an event at the Indian Merchants’ Chamber, Anuj Ranjan, chief general manager at RBI’s fintech department, said that the central bank will be responsible for the expenses relating to the eRupee as it will be part of the RBI’s liabilities just like currency.
“RBI will take care of the infrastructure as this is a public good. The issue of MDR will not be there,” he added.
The MDR, or merchant discount rate, is the rate or amount that a merchant pays to banks to enable them to accept payments by cards. In November 2021, the RBI launched a pilot project for use of eRupee in wholesale trade and, a month later, for retail.
Speaking at the event, Ajay Rajan, country head for transaction banking at Yes Bank, said that the digital wallet is now available for download on both the Google Play Store and Apple App Store. “The installation of the digital wallet can be done only by customers of the bank as we have restricted the app to SIM numbers that are registered with the bank by customers. However, once it is installed, customers can add digital rupees to the wallet from any bank,” he said.
Among the four banks which are participating in the pilot, private lenders Yes Bank, IDFC Bank, and ICICI Bank have already made their digital wallets for storing eRupee available for public download (the fourth participating bank is SBI).
According to Rajan, while cash transactions are free, merchants do have to pay fees to cash-management companies for handling currency notes. He said that several enterprise retail companies including Reliance Retail and Natural Ice Cream have signed up for accepting payments in eRupee.
Ranjan further noted that the eRupee is built to be inclusive and will be available in offline mode as well in the upcoming future. He added that the RBI is working on several solutions to ensure that there is no double-spending of eRupee tokens when its used offline.
