The usage of digital payment methods is rising day by day around the world, and India is no exception. With the recent launch of the E-Rupee, the Indian government has taken a huge step in promoting digital payments across the country. It is an electronic voucher-based digital payment system that aims to make payments more accessible to people who are reluctant to have bank accounts or use other digital payment methods. The E-Rupee has been designed with the motive of promoting financial inclusion in the country by providing a safe, secure, and convenient way for people to make payments without the need for a bank account or smartphone. This means that even those who are not part of formal banking can use the e-rupee to make payments for goods and services. The fundamental part on which the e-Rupee has been developed is anonymity, like physical cash. Once the e-rupee tokens are issued by the bank, there will be no tracking made, whether it is peer-to-peer, payment to sellers, or other forms of digital payments
What is e-rupee?
The E-rupee is introduced by the Government of India in August 2021. It works on blockchain technology, which is known for its immutability, meaning that once the transaction is recorded, it cannot be altered or deleted. E-rupee is based on a QR code or SMS string, which makes it a great alternative to cash. Afterward, this digital currency launched as a pilot project for the wholesale segment on November 1, 2022. The Reserve Bank of India (RBI) selected nine banks to participate in this wholesale pilot project. Those nine banks were the State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and HSBC. It was expected to be used for the settlement of secondary market transactions in government securities. On the same date, the RBI settled Indian government bonds amount in secondary market transactions worth $33.29 million with the help of digital currency. On December 1, 2022, a pilot project for the retail segment was launched by the RBI in Mumbai, New Delhi, Bengaluru, and Bhubaneswar. In the first pilot project, RBI selected eight banks for phase-wise participation, four in the first phase and the other four joining them later on. The first four banks to participate in Phase 1 are the State Bank of India, Yes Bank, ICICI Bank, and IDFC First Bank. Later on, the other four will be the Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank, will join.
It will be issued in the same denomination that paper currency and coins are already issued in. With the E-Rupee, the government aims to reduce the transaction costs associated with cash-based transactions and move towards a cashless economy. At the same time, promoting transparency and increasing the efficiency of the payment system.
The need for e-rupee.
India has been striving towards a cashless economy for a short while, and the introduction of the e-rupee is a huge step in that direction. The need for the e-rupee is primarily to provide equal access to digital payments to all sections of society, including those who do not currently have access to smartphones or digital banking.
It is a prepaid voucher-based digital currency that can be used to make payments without the need for a bank account or a smartphone. This means that it can be accessed by anyone, regardless of their financial status or technical know-how. This digital currency is also expected to address issues of corruption and leakages in government schemes, as payments can now be made directly to the intended beneficiaries without any middlemen.
Another important factor that drove the need for the E-rupee is the COVID-19 pandemic. The pandemic pushed people to shift towards digital payments, which are safer and more convenient than physical cash. However, many people in rural areas are still inclined towards cash-based transactions, which can be risky during a pandemic. The E-rupee can bridge this gap and ensure that everyone has access to safe and secure digital payments.
Overall, the need for an e-rupee in India is driven by the aim of financial inclusion and a cashless economy, as well as the need for a safe and secure payment system during a pandemic. The e-rupee has the potential to revolutionize the Indian economy and bring more people into the formal financial system.
How E-rupee works?
It is a new digital payment system introduced by the Indian government. It is an electronic voucher that can be used to make payments for goods and services, without the need for physical cash. It is designed to be a simple, safe, and secure way to make digital transactions, particularly for those who are currently not part of the formal banking system.
The e-rupee is a one-time payment instrument that is generated and delivered to the beneficiary’s mobile phone or email address. It can be issued up to ten vouchers for one program on unique mobile numbers. And the maximum amount for which each E-rupee voucher can be created is Rs. 10,000 for private entities, whereas for government schemes, it is up to Rs. 100,000 per voucher. This voucher contains a unique QR or 16-digit code that can be used to make payments. The beneficiary can then use this code to make payments to merchants who are registered with the E-Rupee system.
The aim of promoting the e-rupee is to promote financial inclusion and reduce dependence on cash transactions. It can be used for a range of transactions, including government schemes, health care services, and other payments.
Benefits of e-rupee
The introduction of the e-rupee has brought numerous benefits for both the government and citizens. One of the most significant benefits is the elimination of intermediaries, which means that the money will go directly to the beneficiary without any intermediaries taking a cut. This will help reduce corruption and increase transparency in financial transactions.
Another significant benefit is that E-rupee enables the government to disburse welfare benefits, subsidies, and other payments to the intended recipients. This will help the government focus on the sections that need the subsidies, which will benefit the most. As this digital currency doesn’t require a bank account or smartphone, it will bring more people into the sphere of the formal financial system and enable them to participate in the growth of the economy.
Finally, E-rupee is expected to boost the digital economy by promoting the adoption of digital payments and reducing the inclination towards cash-based transactions, which will improve the overall efficiency of the digital payment system. In the long run, it will significantly boost the economy through self-reliance.
Potential impact on the economy.
The introduction of the e-rupee has had a significant impact on the Indian economy. The Indian Government has been promoting digital payments for a very long time. And the most significant impact of its introduction in the Indian economy is financial inclusion, as it allows people to be a part of digital payments, even if they are not connected to the formal banking system or do not have smartphones. According to a recent World Bank report, India is home to half the world’s 1.4 billion adults without access to a banking system. That is why there is a greater need to introduce digital payment methods that are safe, secure, and easily available to all citizens. By introducing digital currency, the government can ensure that everyone has access to safe and secure digital payment systems.
Another significant impact is that it will reduce the cost associated with printing and distributing physical currency. With the introduction of digital currency, the government can save on this expense and allocate it to other crucial areas of the economy.
The e-rupee will also reduce the amount of black money in circulation. Black money refers to income that is earned illegally and not reported to the government to avoid tax. By promoting digital payments, the government can ensure that all transactions are recorded and reported, reducing the amount of black money in circulation.
Comparison with other digital payment methods
E-rupee, the latest digital payment method in India, has attracted a lot of attention since its launch. And it has been compared to many other popular digital payment methods currently available in the country, such as UPI, mobile wallets, and debit and credit cards.
One of the key advantages of the e-Rupee is that it is a government-backed digital payment method, which is expected to increase its credibility among the masses. In comparison, UPI, mobile wallets, and debit/credit cards are usually operated by a private company, which may lead to concerns regarding security and data privacy.
Another significant difference between E-rupee and other digital payment methods is that E-rupee does not require you to have a bank account or a smartphone. This makes it more accessible and accepted by a wider section of the population. Especially in rural areas, where access to banking systems, smartphones, and internet connectivity is limited,
However, it remains to be seen if E-rupee can truly compete with other established digital payment methods in terms of convenience, ease of use, and merchant acceptance. Mobile wallets and UPI, for instance, have already gained widespread acceptance among merchants and consumers; it may take some time for E-rupee to catch up.
Challenges in implementing e-rupee
The implementation of the e-rupee in India has its own set of challenges. One of the biggest challenges is the adoption rate. India is a country with a vast population of different age groups, backgrounds, and educational levels. Therefore, it is essential to educate the masses about how to use the e-rupee and what its benefits are to ensure a high adoption rate.
Another challenge is the availability of the technology required to make use of the e-rupee. While the younger generation is familiar with technology, many in the older generation may not have access to smartphones or even the internet currently. This lack of technological access could lead to a digital divide, further marginalizing those who are already economically disadvantaged.
Furthermore, India is a country with a high level of economic inequality. It’s essential to ensure that the E-Rupee system is accessible to everyone, regardless of their economic background. This may require special provisions, such as subsidies or grants, to ensure that the poor section of society can also take advantage of the digital payment system.
Lastly, the security of the E-Rupee system is of utmost importance. With any digital payment system, there is always a risk of fraud, data breaches, and cyber-attacks. It is essential to put in place strict security measures to prevent any such incidents that could lead to a loss of public trust in the system.
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