2 mins Read | 1 Year Ago

5 W’s of Digital Rupee; India’s CBDC

5 W’s of Digital Rupee; India’s CBDC (What, When, Where, Why & Who?)


  • CBDC (Central Bank Digital Currency)

Central Bank Digital Currency (CBDC) is the digital form of a country’s fiat currency. It is akin to sovereign paper currency but takes a digital form, thus, exchangeable one-to-one with the fiat currency. For example, in the United States of America a CBDC would be the digital form of the dollar. In layman’s terms, cash will now be of two types: paper/physical (banknotes, coins) & digital (CBDC). Just like the physical notes are printed & issued by the central bank and are a liability of the central bank, CBDCs are also digitally created & issued by them & are their liability.

  • Digital Rupee (e₹); India’s CBDC

The Reserve Bank of India (RBI) defines CBDC as a legal tender issued by a central bank in a digital form. Digital Rupee is the name given to India’s version of CBDC, which is in the form of a digital token that represents the Indian Rupee. As a legal tender, the Digital Rupee shall be accepted as a medium of payment and would have a safe store of value. It is being issued in the same denominations that paper currency and coins are currently issued. As in the case of cash, it will not earn any interest and can be converted to other forms of money like deposits with banks.


RBI has launched the first pilot for retail Digital Rupee on 1st Dec 2022 to test the robustness of the entire process of digital rupee creation, distribution and retail usage in real time. Different features and applications of the e₹- R token and architecture will be tested in future pilots based on the learning from this pilot.


Currently the pilot covers Mumbai, New Delhi, Bengaluru, Bhubaneshwar & Chandigarh. The pilot will later be extended to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. The scope of the pilot may be expanded gradually to include more users and locations as needed.

The world is rapidly changing and the way we transact with money is no exception. People and businesses across the globe have started dabbling in cryptocurrencies as an alternate medium to accept payments. Even though the usage is relatively very small, world’s central banks have realised that they need to provide an alternative or let the future of money pass by.

Advantages of the Digital Rupee

  • Being a sovereign currency, the Digital Rupee holds unique advantages of central bank money viz. trust, safety, liquidity, settlement finality and integrity.

  • Digital Rupee reduces the operational cost involved in printing and managing physical cash.

  • Instant Transactions: Digital Rupee transactions are processed instantly, reducing the waiting time for clearing and settlement.

  • Increased security with Distributed Ledger technology: Digital Rupee transactions are secured using blockchain and advanced encryption technology. They are immutable which reduces the risk of fraud and hacking.

  • Offline feature of CBDC (to be rolled out in future pilots) would be beneficial in remote locations and offer availability with resilience benefits when electrical power or mobile network is unavailable.

  • Low credit risk for customers, since just like physical cash, it is backed by the central bank

  • Boosting innovation in cross-border payments. CBDC will reduce the charges and time required to process the cross border transactions. It provides the similar utility that any private virtual currencies can provide without the associated risks.

  • Safety & stability of the financial system by countering the threat of cryptocurrency. Providing public with uses that any private digital currencies can provide without the associated risks.

  • Fostering financial inclusion due to the ability to transact without a bank account (To be rolled out in future pilots).


Digital Rupee can be used by both customers as well as merchants. Currently, it is an invite based pilot in selected cities.

Customers: Customers in the selected cities will be sent an invite via email, SMS, WhatsApp & other official communication channels with a link to download the mobile application. After downloading the application, customers will have to undergo a simple registration process which includes linking their ICICI Bank Savings Account and authenticating it using their Debit Card details. Once the registration process is complete, a Digital Rupee wallet will be created for the customers, where customers will be able to load money from their bank account & use it for transactions. Customers will be able to use the mobile application to make fund transfers to their friends and family. Customers will also be able to use the app to make payments to merchants who are onboarded on the CBDC platform.

Offline merchants: Merchants will be sent an invitation using similar channels as customers. Additionally, ICICI Bank officials will reach out directly to merchants in the selected cities to get their consent and onboard them for the Digital Rupee. Onboarded merchants will be provided a QR code that they can place at their shop for receiving payments. Offline merchants will also be onboarded using the services of aggregators who will provide Digital Rupee as a payment acceptance method in their POS machines.

Online merchants: Online merchants will be onboarded directly by bank as well as with the help of online aggregators. Digital Rupee as a payment option will be integrated in the check-out pages of these merchants.

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