2 mins Read | 1 Year Ago




Digital Rupee and UPI (Unified Payments Interface) are two different concepts that are commonly discussed in the context of digital payments in India. While Digital Rupee is a digital currency, UPI is a platform for digital payments that has already been implemented. In simple terms, Digital Rupee is ‘Money’ & UPI is a way to ‘Move Money’.

Digital Rupee is a digital version of the Indian currency ‘Rupee’ which is launched by RBI. The idea behind Digital Rupee is to provide a digital alternative to cash and physical currency that is easier to use, secure and accessible to a wider range of people. Digital Rupee is expected to make transactions faster, cheaper and more secure, thus making digital payments more accessible to people.CBDC provides the feasibility to reduce concentration of liquidity and credit risk in payment systems.

UPI on the other hand is a payment platform that enables instant money transfer between two bank accounts through a mobile phone. UPI was launched by the National Payments Corporation of India (NPCI) in 2016 and has become a popular mode of payment in India due to its ease of use, security and low transaction charges. UPI allows users to send and receive money, pay bills and carry out transactions using a virtual address linked to their bank account. It is built on top of the Immediate Payment Service (IMPS) which is a real-time inter-bank electronic fund transfer service. UPI allows customers to send and receive money from their bank accounts using a mobile phone without the need for Net Banking or any other physical mode of transaction. It provides a single platform for all bank transactions and enables instant money transfers 24x7, which makes it a highly convenient and secure mode of payment.


Digital Rupee


Similarity with money

Digital Rupee is money.

It is a Legal Tender (Electronic form of sovereign currency).

    UPI is a way to move money.

UPI applications are methods of transferring funds or payment methods.

Store of value

Digital Rupee is a store of value like currency.

UPI is an overlay infrastructure on top of any form of store value like bank account that encompass the normal currency.


Money is transferred from one digital wallet to another.

Money is transferred from one bank account to another.



Takes place according to the settlement cycle.


Anonymity is possible due to the product design. It will be available in some form in the coming months.

Anonymity is not possible.

Form factor

Denomination based just like physical currency

Amount based


Digital Rupee in the digital wallet is equivalent to physical cash in a physical wallet. Once the customer loads digital rupee in a digital wallet, it is treated as cash withdrawn from the bank account. Hence the customer can’t earn interest on the amount.

Since the amount is kept in a bank account, the customer can earn interest on the account balance.

Settlement Process analogy:

From a consumer perspective, there is no specific difference in the system and the transfer looks very similar to a UPI. However, there is a major difference from the banking perspective.
For E.g. Let’s assume you have paid Rs 200 to your cab driver via UPI using any app. In the front end of the UPI app, you would see that the amount is debited from your account and credited to the driver’s account. However, this is just a ledger entry. The actual fund transfer happens during the bank settlement cycle (which is not an instant process).

In the case of CBDC, there will be an exchange of token/tokens between the driver and you in real time. So this is as good as giving a 200 rupee note to the cab driver. The immediate capture of the ledger and instant fund transfer inhibits the need for a settlement process as both the front and back end get updated immediately.

While the Digital Rupee is still under exploration, UPI is a functional and widely used payment system in India. Digital Rupee aims to create a virtual currency that can be used for transactions while UPI aims to provide a seamless and efficient mode of inter-bank transactions using mobile phones. Both Digital Rupee and UPI have the potential to greatly improve the Indian financial system and promote financial inclusion. The success of UPI is a positive sign for the eventual implementation of the Digital Rupee.

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