What is Digital Rupee and How It Will Transform Digital Payments in India

Digital Rupee or e-Rupee (e₹) is the official digital currency issued by the Reserve Bank of India (RBI). To put it simply, it's like the physical notes and coins we use every day, but in an electronic form with the same legal tender status. As of March 2025, e₹ circulation surged to ₹1,016 crore, highlighting trust and adoption. This article will help you understand what the Digital Rupee is and how it will change the way digital payments happen in India. 

Understanding the Digital Rupee: A Central Bank Digital Currency (CBDC)

Issued directly by the RBI, the Digital Rupee is a Central Bank Digital Currency (CBDC). The main difference between the Digital Rupee and private cryptocurrencies is that the former is backed by sovereign guarantee, as it is an RBI liability. As a result, it has the same legal standing as physical currency.

The Digital Rupee has been designed to complement the existing payment system and physical cash, and not to replace it. With this, the central bank aims to give you an additional payment option that’s safe, efficient, and backed by the government.

Also Read: Here’s Why Digital Lending is Getting so Popular in India

How the Digital Rupee Will Transform Digital Payments in India

Currently in its pilot phase, the Digital Rupee is being tested to ensure its functionality, security, and scalability. This gradual rollout helps raise awareness while assessing its performance before a nationwide launch. Here's how it can impact the digital payment system in India:

• Enhancing Financial Inclusion: The Digital Rupee’s offline feature intends to enable transactions in areas with poor or no internet connectivity. Designed to work like physical cash, it would operate via telecom connectivity or NFC (Near Field Communication), promoting inclusion in remote regions. This offline functionality is currently in pilot testing and not yet available nationwide.

• Instant Settlements: Transactions made with e₹ are settled instantaneously, reducing the need for interbank settlements and speeding up the overall payment process.

• Lower Transaction Costs: e₹ will help reduce transaction costs over time, making digital payments more cost-effective for both consumers and businesses.

• Seamless Integration with Existing Systems: The Digital Rupee complements existing payment systems such as UPI and mobile wallets, offering a more secure and efficient payment option.

• Programmability for Specific Use Cases: e₹ can be programmed for specific purposes such as DBT, loans, and allowances, with customisable parameters including expiry date, geo-location, and merchant categories. This adds flexibility for both consumers and the government. Programmability is being tested in controlled pilots and has not yet been fully deployed.

• Direct Claim on the RBI: e₹ is a direct liability of the RBI, providing it with a higher level of security than commercial bank deposits or private digital currencies.

• Fostering Innovation: Looking ahead, e₹ could enable new innovations like programmable payments and more efficient cross-border transactions, positioning it as a vital component of India’s future digital economy.

How to Access and Use the Digital Rupee

The Digital Rupee (e₹) can be accessed through apps currently provided by 19 participating banks, available for both Android and iOS. Access is limited to pilot banks, and a nationwide rollout is still pending as adoption is being phased in gradually. Once you have the app, you can:

• Load the Wallet: Transfer funds from your bank account, which are converted into digital rupee tokens.

• Make Payments: Use the loaded e₹ to send payments to others (Peer-to-Peer) or merchants (Peer-to-Merchant). Payments are made by scanning a QR code, similar to how you use UPI today.

Your Digital Rupee is stored in a dedicated CBDC wallet on your mobile device. Even though it’s a digital currency, the wallet's security features are backed by the RBI’s robust infrastructure.

Note: The most recent official information from the RBI FAQs lists 19 banks offering e₹ wallets, while the annual report as of March 2025 indicated 17 banks were part of the expanded pilot.

Also Read: Digital Lending has Become the Need of the Hour. Read How!

To Conclude

The Digital Rupee is a landmark initiative by the RBI that offers a secure, sovereign-backed alternative to cash. By using a digital rupee wallet, you can experience a new dimension of digital payments that promises greater security and financial inclusion. As India advances towards a more developed digital economy, the e₹ will play a crucial role. Its nationwide availability will follow a phased rollout, ensuring stability and security before full-scale adoption.

FAQs

Is the Digital Rupee a cryptocurrency like Bitcoin?

No, the Digital Rupee is a CBDC issued and backed by the Reserve Bank of India, making it legal tender. Cryptocurrencies are private assets with no central issuer or sovereign guarantee.

Will the Digital Rupee replace UPI or cash?

No, the Digital Rupee is intended to be an additional payment option. It will complement existing systems like UPI, mobile wallets, and physical cash.

Can I earn interest on the Digital Rupee held in my wallet?

No, just like physical cash, the Digital Rupee is a non-interest-bearing instrument. Its purpose is for transactions, not for investment.

What is the main difference between the Digital Rupee and money in my bank account?

Money in your bank account is a liability of the commercial bank where you hold the account. The Digital Rupee, however, is a direct liability of the Reserve Bank of India, offering greater security.