Both existing UPI and the new e-Rupee help make online transactions easy. However, they are not the same. Read to know how exactly they are different.
On Wednesday, Shaktikanta Das, in the post-policy press conference, clarified the difference between the e-Rupee and the digital rupee. Das is the governor of the Reserve Bank of India (RBI). On December 1, the RBI began a retail pilot project of the e-Rupee or the central bank digital currency (CBDC).
E-Rupee and UPI: How are they different?
The most important difference between the two modes of digital payment is the source of transfers. For Unified Payments Interface (UPI), payments go through a bank, the money is transferred from the wallet to the digital currency. “Any UPI transaction involves intermediation of the bank. In CBDC, just as paper currency users go to the bank, draw currency and keep it in their purse, similarly, here also users can draw digital currency and keep it in their mobile phone wallet and make payments. It will move from one person’s wallet to the other person’s wallet without the intermediation of the bank,” explained Das.
Additionally, “UPI is the movement of money from a bank account to a bank account, and digital rupee is a payment of cash. It is possible that two private entities can be provided the wallet and money can be moved between them, which is not possible with UPI because UPI has to involve a bank for payment,” stated T Rabi Sankar. Shankar is RBI’s deputy governor.
More on the benefits of digital currency
The RBI governor, in his speech also highlighted the key features of the e-Rupee- digital anonymity and transaction trails. Digital money moves from one wallet to another without sharing information the details with third parties such as the bank. Shankar added that through CBDC, money can be directly moved between two individuals or businesses, just like cash. However, in UPI, the transfer is between bank accounts.
However, a PAN is a must for e-Rupee transactions above a certain threshold. This helps in ensuring the prevention of illegal transfers and black money flow. “The income tax department has got certain limits for cash payments like beyond a certain limit you have to give PAN number; the same rules will apply in the case of CBDC because both are currencies,” stated Das. “The amendment in the RBI Act with regards to the CBDC says that currency will also include digital currency. There is no difference in paper currency and digital currency,” added the governor. Hence ensuring there is no difference between the e-Rupee and cash.
