The introduction of the digital rupee has elevated India to the ranks of developed nations that have reacted to the demands of the digital future.
On November 1, the Reserve Bank of India introduced India's first Digital Rupee for wholesale transactions. The Reserve Bank of India (RBI) issues currency notes in the form of the digital rupee (e), which is commonly referred to as Central Bank Digital Currency (CBDC). It is virtually identical to banknotes, but because it is digital, it is likely simpler, faster, and cheaper. In addition, it offers all the advantages of other digital payment systems for transactions.
The Reserve Bank of India has selected nine banks to participate in the digital rupee wholesale pilot project. These include the Union Bank of India, the State Bank of India, the Bank of Baroda, the HDFC Bank, the ICICI Bank, the Kotak Mahindra Bank, the Yes Bank, the IDFC First Bank, and the HSBC.
The launch procedure has two steps. During this test period, the digital rupee has been introduced for the first time for wholesale or large transactions. The Reserve Bank of India will run a parallel retail test to the wholesale e-rupee pilot this month.
The CBDC (Central Bank Digital Currency) cannot be directly compared to cryptocurrencies since the digital rupee is neither a tangible item nor a virtual asset. Coins of a cryptocurrency are not money either.
This digital rupee can be converted into currency, similar to the paper banknotes issued by central banks such as the RBI. The CBDC, which will function similarly to banknotes but is not a decentralized asset like cryptocurrencies, will continue to be issued by the RBI.
A nation's fiat currency is referred to as its central bank digital currency (CBDC), whereas cryptocurrencies are an alternative payment method with their own algorithm. The crypto currencies are digital assets in a decentralized network, and the digital currencies are the nation's digital currency. The value of a crypto currency, on the other hand, is independent of central banking authorities and follows a transparent process from mining to ownership to asset transfer, in contrast to digital currencies, whose value is entirely defined by the central bank and the government.
The primary purpose of the Reserve Bank of India's (RBI) pilot project on digital currency is India's advancement in the war for virtual currencies. This is due in part to the increasing popularity of cryptocurrencies.
According to Rachit Chawla, the introduction would undoubtedly alter the playing field because the digital rupee will boost efficiency and transparency via blockchain technology. Blockchain will also allow for ledger maintenance and real-time tracking.
Whether they are wholesale or retail, customers will have ongoing access to the payment system. Direct payments from Indian clients decrease transaction fees and permit real-time account settlements. In addition, the use of a digital rupee will accelerate foreign trade and eliminate the need to open a bank account.