RBI Governor explains, how the e-rupee is different from UPI.
On December 7, Reserve Bank of India (RBI) governor Shaktikanta Das sought to clarify the key differences between the Central Bank Digital Currency (CBDC) and Unified Payments Interface (UPI), saying e-rupee transactions will not have any intermediary, unlike UPI transactions.
CBDC, or e-rupee, is the equivalent of fiat currency in digital form, while UPI is a platform to facilitate banking transactions.
“Any UPI transaction involves the intermediation of the bank. So, when I use a UPI app, my bank account gets debited and money gets transferred to the recipient’s bank. In paper currency, you can draw Rs 1,000 from the bank, keep it in your wallet and spend it at a shop,” Das said.
“Similarly in CBDC, you will draw the digital currency and keep it in your wallet on your mobile. When you make a payment at a shop or to another individual, it will move from your wallet to your wallet. There is no routing or intermediation of the bank,” Reserve Bank of India (RBI) governor Shaktikanta Das said.
RBI Governor Das also sort to address concerns about the possible fallout of lack of anonymity in CBDC transactions.
“When you pay in currency notes to another person, no one can find out because that information is not available to the bank. Even in the case of CBDC, you cannot find out because the information is not available to the bank. It goes from my mobile to another mobile. So, why should we create a fear psychosis,” the governor said.
“Plus, its (CBDC’s) use cases can be many more. Money has various functions, it can do all those functions. It all depends on how much our startup and fintech ecosystem innovates and what kind of payment channels it opens up. We will set up the base system and then the private sector can innovate,”