Revolutionizing Payments: The Game-Changer You Won’t Believe India Just Launched!

This development enables seamless transactions between retail digital rupee wallets and the Unified Payments Interface (UPI), thus opening the door to broader acceptance of electronic currency.

CHENNAI: While central banks worldwide contemplate the issuance of digital currencies, Indian banks have taken the lead by introducing interoperability between the country’s digital payment platform, the Unified Payments Interface (UPI), and the Central Bank Digital Currency (CBDC). This innovation ensures that transactions between retail digital rupee wallets can now smoothly integrate with UPI, ultimately facilitating the widespread adoption of digital currency.

What Exactly Are CBDCs?

The Digital Rupee (eS), a CBDC issued by the Reserve Bank of India (RBI), holds the status of legal tender, akin to traditional paper currency. It carries a sovereign guarantee and represents a direct claim on the central bank’s balance sheet. eS can be used for conducting digital transactions or storing value, with the added benefit of conversion into commercial bank money or cash.

RBI initiated the CBDC retail pilot program last December to evaluate the real-time processes of digital rupee creation, distribution, and retail utilization. As of August 31, 2023, the program has garnered participation from 14.6 lakh users and 3.1 lakh merchants.

Distinguishing CBDCs from Virtual Currencies

It’s crucial to distinguish CBDCs from cryptocurrencies like Bitcoin. CBDCs lack intrinsic value and are not backed by assets or sovereign guarantees, setting them apart from cryptocurrencies.

The UPI-CBDC Interoperability Advantage

The UPI-CBDC interoperability feature empowers users to scan any merchant’s UPI QR codes and make payments using their digital rupee (retail) wallets. Merchants no longer require an e-rupee wallet or a separate QR code to accept e-rupee payments from senders. Similarly, users can leverage their CBDC wallets for transactions on UPI QR codes.

Individuals can also engage in Person-to-Person (P2P) money transfers with e-rupee.

Why Interoperable Systems Matter

Currently, UPI boasts 35 crore registered users and is projected to witness threefold growth, reaching 100 billion monthly transactions, according to officials. Numerous individuals rely on UPI-based applications for daily transactions, even for modest amounts. This integration allows CBDC wallet users to tap into this extensive network, facilitating widespread e-rupee adoption.

Commercial banks anticipate that this integration will revolutionize the digital payments landscape in the country, promoting the shift towards a cashless economy. Furthermore, it is expected to enhance financial inclusion, as the UPI interoperability feature is poised to significantly boost CBDC adoption across the nation, as stated by a senior banking official.

Presently, a select group of large private and public sector banks, including State Bank of India, Union Bank, IDFC First, Punjab National Bank, HDFC, ICICI, Kotak Mahindra, and YES Bank, among others, offer UPI-CBDC interoperability.

How to Utilize eS?

Retail users can download the ‘Digital Rupee’ app provided by their respective banks. To minimize disruptions, the RBI is rolling out digital rupee adoption in a phased manner. Banks have pre-selected users and have allowed customers from specific cities, primarily major metropolitan areas and tier-II cities, to use digital rupee applications.

Each bank has introduced a dedicated ‘Digital Rupee’ mobile application for Android, with some banks also offering iOS versions.

To get started:

  1. Download the digital rupee app from your bank.
  2. Register using the same SIM card linked to your bank account.
  3. Set up an app PIN and authenticate with your device password.
  4. Enter your name and select your wallet.
  5. Link your chosen bank account to the wallet.
  6. Click on ‘Load digital Rupee’ to transfer funds from your linked account or through various UPI apps.
  7. Upon verification, your linked account will be debited, and your digital rupee wallet will be credited with selected denominations, instantly.

eS denominations are consistent with those of physical paper currencies and coins, ensuring familiarity.

Users can download and register on the digital rupee applications, and upon approval, they will receive notifications via registered email or SMS to join the pilot program.

Wholesale Usage

The CBDC-Wholesale Pilot, launched on November 1, 2022, restricts access to select financial institutions for settling secondary market transactions in government securities. RBI intends to explore additional use cases in the future.

Advantages of e-rupee

Unlike physical wallets, e-rupee wallets can be restored if an individual loses their mobile phone. The RBI’s decision to issue digital currency aims to reduce operational costs associated with physical cash movement, offer alternatives to cryptocurrencies, mitigate settlement risks in the financial system, provide cost-effective cross-border payment solutions, and enhance financial inclusion.

Distinguishing UPI from CBDC

In essence, UPI serves as a digital payments platform, enabling instant money transfers between two bank accounts through an interbank interface. On the other hand, e-rupee represents a digital form of traditional cash.


The UPI-CBDC interoperability feature empowers users to scan UPI QR codes and make payments using e-rupees. CBDC wallet users can tap into the 35 crore+ UPI user base for everyday transactions, creating a substantial foundation for e-rupee adoption.

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