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How is e-rupee different from UPI? | Five takeaways from the RBI governor’s press conference

Since the launch of the pilot programe of the retail central bank digital currency, there has been some confusion about where the digital currency and UPI fit.

December 07, 2022 / 05:13 PM IST

Reserve Bank of India (RBI) governor Shaktikanta Das on Wednesday, December 7, clarified the difference between the digital rupee and Unified Payments Interface (UPI). Speaking at the post-policy press conference, Das listed out the differences between the two.

The context of the RBI clarification was the chatter in the last few days following the launch of the pilot retail central bank digital currency (CBDC) within a closed user group about the roles of digital currency and UPI.

The RBI started a pilot for the retail digital rupee (e-₹ R) on December 1. The central bank has identified eight banks for the first of the two-phase project.

Here are five takeaways from the RBI’s post policy press conference.

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Das pointed out that transactions through UPI must go through a bank, whereas in the case of the digital currency, the money gets transferred from wallet to wallet without any such involvement.

“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 the 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,” the RBI governor said.

“UPI is movement of money from bank account to 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,” said RBI deputy governor T Rabi Sankar.


The governor added that anonymity is a key feature of the digital currency because the currency will move from one wallet to another directly, and hence will not have a digital footprint.

Das added that as in the case of physical currency, for the digital rupee too, a third party cannot find out to whom the money has been transferred as this information is not available with a bank.

Sankar added that the CBDC can enable the movement of money directly between two private entities, individuals or businesses, as is the case with cash. In UPI, though, the movement is only between two bank accounts.

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PAN required for CBDC

Currently, a person making a transaction above a certain threshold has to submit his or her PAN. This had been introduced to prevent illegal transfers and to curtail the flow of black money. Das said that the same rules apply to the newly launched digital currency.

“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,” the governor added.

Amendments in RBI Act

Das said that the central bank has made necessary amendments to incorporate the digital currency under the RBI Act.

“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,” the governor said.

The concept note on CBDC published on October 7 said that as per the RBI Act, 1934, the Reserve Bank has the sole right to issue banknotes, which has now been amended to include currency in digital form as well.

“Therefore, in this model, RBI will create and issue tokens to authorised entities called Token Service Providers (TSPs) who in turn will distribute these to end-users who take part in retail transactions,” the note said.

Technological solutions

The central bank is also looking to tap tech for the digital currency. “We are looking at technological solutions and we understand that the technology is possible,” Sankar added.

Manish M. Suvarna
Manish M. Suvarna is Senior Correspondent at Moneycontrol. He writes on the Indian money markets.