Business: Google Pay, Walmart-backed PhonePe and Amazon Pay are among the five payments companies that want to participate in the Indian central bank’s digital currency trial by facilitating transactions through e-Rupi, according to a Reuters report. Indian fintech companies Cred and MobiKwik are also looking to join the pilot, the report said, citing sources. These payments firms are collaborating with the Reserve Bank of India (RBI) and the country’s payments authority, the National Payments Corporation of India (NPCI), and are expected to launch e-Rupi access within the next three to four months. Expanding user base amid falling transactions Despite e-Rupi transactions peaking at over 1 million daily late last year, they have since dropped to around 100,000-200,000 per day, one source said.
According to another source, well-known payments firms facilitating e-Rupi transactions are expected to expand the user base, potentially boosting transaction volumes. Collectively, these five payment firms handle more than 85 per cent of digital payments through UPI, handling about 13 billion transactions every month. The report claims that while the central bank continues to promote e-Rupi, there are no immediate plans to fully launch the digital currency.
e-Rupi will likely remain in the pilot phase for the next few years.
What is RBI’s digital currency?
The Reserve Bank of India launched the e-Rupi pilot, the digital equivalent of physical currency, in December 2022. Although there was an initial surge in e-Rupi transactions, it has since declined, indicating the challenges faced by central banks around the world in promoting digital currencies. Initially, only banks were allowed to offer e-Rupi through their mobile apps, but in April, the central bank announced that payment firms could also provide e-Rupi transactions on their platforms after being approved by the RBI. Google Pay and Amazon Pay, the startups of Alphabet Inc. and Google Pay, respectively, are the first banks to launch e-Rupi transactions on their platforms. Digital Rupee has been introduced by Google and Amazon.com, enabling retail payments through India’s widely used Unified Payments Interface (UPI). India’s digital rupee, also called eRs or eINR, is a central bank digital currency (CBDC) issued by the Reserve Bank of India (RBI). It represents a tokenized digital version of the Indian rupee operating on blockchain or distributed ledger technology. The digital rupee aims to enhance financial inclusion, facilitate efficient digital transactions, and keep pace with India’s technological advancements. Unlike cryptocurrencies such as Bitcoin, the digital rupee is fully integrated into RBI’s monetary policy and payment infrastructure.
Key Features of CBDC
The digital rupee acts as a legal tender, accepted by individuals, businesses, and government bodies. It is issued in accordance with RBI’s financial policies and can be converted into physical cash through commercial banks. Transactions using the digital rupee are processed more quickly and securely than traditional banking systems. Additionally, the digital rupee is likely to have programmable features such as smart contracts. RBI has introduced the digital rupee for wholesale (eRs-W) for inter-bank settlements and retail (eRs-R) for consumer and business transactions. By February 2023, the digital rupee had reached 50,000 users and 5,000 merchants. The implementation of the digital rupee aims to reduce the security printing costs associated with physical currency, which is almost equivalent to Google Pay, PhonePe, and Amazon Pay.
