• UGI USER
  • Oct 26, 2023
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Digital Rupees

Q. What is a Digital Rupee, how does it work, and why this move can be a game changer for the Indian economy Discuss.

Structure of India

Introduction

  • Explain what is digital rupee, who issues it.

Body

  • Mention how digital rupee works.
  • Mention benefit of digital rupee to various sectors.
  • How Digital Rupee to be game changer for the Indian economy.

Conclusion

  • Mention the significance of digital rupee in improve financial services accessibility and provide an innovative way of maintaining and transacting with the Indian rupee.

The digital rupee is a central bank digital currency (CBDC) issued by the Reserve Bank of India (RBI). It is a digital form of the Indian rupee that is legal tender and can be used to make payments and settle transactions.

How Does the Digital Rupee Work?

  • Digital Token of Legal Tender: The e₹-R is a digital token that mirrors the value of physical currency. It is issued in the same denominations as paper currency and coins.
  • Distribution through Banks: The e₹-R will be distributed through banks, making them intermediaries for its issuance and management.
  • Mobile Wallets: Users will access and transact with e₹-R through digital wallets provided by participating banks. These digital wallets are stored on users’ mobile devices.
  • Versatile Transactions: e₹-R enables both Person-to-Person (P2P) and Person-to-Merchant (P2M) transactions. Payments to merchants can be made by scanning QR codes displayed at their locations.
  • Security and Trust: The digital rupee is designed to replicate the trust, safety, and finality of physical cash, ensuring the security and irreversibility of transactions.

Digital rupees can benefit various sectors

  • Small Businesses: Facilitate easier and faster payments, saving time and money.
  • Farmers: Enable direct sales, fetch better prices, and reduce middlemen dependency.
  • Migrant Workers: Lower remittance costs, improving families’ financial well-being.
  • Government: Reduce service delivery costs and ensure timely, full payments like social security and subsidies.

Digital Rupee to be game changer for the Indian economy

  • Financial Inclusion: The e₹-R extends financial services to the unbanked and underbanked populations, promoting financial inclusion on an unprecedented scale.
  • Ease of Transactions: Digital currency streamlines transactions, making them more efficient and secure. It reduces the dependency on physical cash, leading to a cashless economy.
  • Reduced Costs: With lower transaction costs, the e₹-R is poised to drive down the expenses associated with banking and financial services.
  • Improved Governance: Digital transactions are easier to track and monitor, potentially reducing illicit financial activities and tax evasion.
  • Digital India Initiative: The e₹-R aligns with India’s broader Digital India initiative, emphasizing the digitization of services and infrastructure.

With the launch of the digital rupee, India’s economy is about to undergo a significant transition. It may significantly improve financial services accessibility and provide an innovative way of maintaining and transacting with the Indian rupee by offering efficient, safe, and inclusive digital transactions.