Central Bank Digital Currency (e-Rupee): Advantages and uses

The Reserve Bank of India (RBI) launched the Central Bank Digital Currency pilot program on November 1, 2022, for the wholesale segment. A similar pilot project for retail users, or CBDC-R, was launched on Dec 1^st, 2022, and is now available to the public in a limited manner.

The Central Bank Digital Currency is expected to bring about several benefits, including the potential to boost the Indian economy. Let's take a closer look at CBDC, its advantages, and the registration process to help you get started. 

What is CBDC?
 

The digital rupee is the electronic incarnation of the Indian National Rupee, India's official currency. The central banks of 112 countries are currently developing digital avatars for their currencies, while 11 countries have already launched them.

The CBDC is a means of payment and settlement that allows the public to gain digital and direct access to liquid cash. Like paper money, digital currency or e-rupee remains a central bank liability, and the nation's fiat currency dictates its value.

CBDCs are developed in two distinct categories: 

• Wholesale CBDC or CBDC-W - designed for institutional use to settle payments
• Retail CBDC or CBDC-R - intended for the general public to carry out everyday financial transactions

Advantages of CBDC for the Indian economy
 

In terms of operational efficiency, CBDC will probably compete with cryptocurrencies, as a fast, digitised medium of exchange. However, unlike cryptocurrencies, digital currency is backed by a central bank, and is legal and reliable. As CBDC is an electronic form of physical cash, you cannot invest in it, and you won’t be able to earn interest on your e-rupee wallet amount. 

As the government moves toward a cashless economy, digital currency, or e-rupee, is expected to accelerate its efforts. Additionally, it could prevent money laundering, terror funding, and tax evasion, which are difficult to combat in a cash-based economy. With digital currency, financial inclusion and transparency will be enhanced in the country by standardizing electronic payments. 

Advantages of CBDC for the common person
 

As retail CBDC becomes more widely accepted, here are some of the advantages that may be gained by citizens:

• Cross-border remittances will benefit from reduced disbursement times. Since CBDC delivery is made in real-time (and 24x7x365), it eliminates long turnaround times, especially during long weekends and holidays. However, to make this a reality, compatibility among CBDCs from different countries will be essential.
• End-users can expect a wallet-like tool for receiving and storing CBDCs. They can then use it to make person-to-person or person-to-business payments.
• The use of near-field communication (NFC) technology could also see an offline CBDC wallet. It could offer easy and safe peer-to-peer transfers even in places with poor internet, using a smartphone's NFC feature.

How to use digital currency?
 

Here are the things you must know before using digital currency:

• An e-Rupee is an electronic token issued by the RBI for retail digital rupee transactions.
• The digital rupee will be issued in the same denomination as paper currency and coins. Banks will be the intermediaries issuing digital tokens of the prevailing money.
• The banks will provide digital wallets that can be accessed via electronic devices such as phones and
• You can use your wallet for person-to-person (P2P) payments and person -to merchant payments (P2M). You simply need to scan the QR codes displayed in shops and merchant outlets.
• An e-Rupee can be used for payments at various outlets and shops without intermediaries (banks). However, you will need a bank deposit to convert it into a digital rupee. It can be deposited back into your bank account anytime at your convenience. However, keep in mind that digital currency in a wallet does not earn any interest.

How to register for CBDC with IDFC FIRST Bank

If you are an IDFC FIRST Bank customer selected for the CBDC pilot project, the bank will send you an SMS on your registered mobile number or email to your registered email address, which will include a link to the e₹ (Digital Rupee) app.

Click on the link to download, and follow the step-by-step guide below to complete the sign-up/ registration process:

• Click on Start Registration after reading and accepting the Terms & Conditions 
• Verify the SIM card for the registered mobile number
• Click on Set App PIN and authenticate with your device's password (PIN, Face Unlock, or Fingerprint)
• Enter your name in the field provided and click on Choose Wallet 
• Enter your PIN in the first input field. Confirm your PIN in the second input field. Click on the "tick" button on the numpad to proceed
• "Wallet Successfully Created" will be displayed on your screen
• Next, click on View Wallet Address, select Wallet, and then select "Link IDFC FIRST Bank Account"
• Click on Continue to allow the app to fetch existing IDFC FIRST Bank accounts linked to the registered mobile number
• Select the account you would like to connect to the wallet
• Enter the last 6 digits and expiration date of your Debit Card 
• When the sign-up/registration process is completed, a "Bank Account Linked Successfully" message will appear 
• You can now use e₹ (Digital Rupee) and enjoy CBDC's benefitsIf you are an IDFC FIRST Bank customer selected for the CBDC pilot project, the bank will send you an SMS on your registered mobile number or email to your registered email address, which will include a link to the e₹ (Digital Rupee) app.

To sum up 
 

While the Indian public has been rather quick to adopt digital payments, it still has some way to go in the country. The introduction of CBDC could be the catalyst for a cashless economy, considering it offers safer, faster, and more streamlined transactions.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.