The Reserve Bank of India (RBI) has introduced a new digital version of the Indian rupee, called the e-rupee. The e-rupee is a digital version of the physical rupee and is intended to be used for digital transactions.
On Dec 1 2022, the RBI has announced start of the first phase of the retail e-rupee pilot for retail customers in four cities- Delhi, Mumbai, Bengaluru and Bhubaneshwar.
The users will be able to use e-Rupee through a digital wallet offered by a bank and store the wallet on mobile phones and other devices.
The transactions can be person to person, or to a merchant through QR codes
Advantages of e-rupee:
Increased security: Digital transactions using the e-rupee will be more secure than physical transactions as they will be protected by advanced encryption and digital signature technologies.
Convenience: Digital transactions will be faster and more convenient than physical transactions as they will not require the exchange of physical cash.
Increased efficiency: Digital transactions will also increase the efficiency of financial transactions as they will not require the use of intermediaries such as banks and financial institutions.
Access to finance: Digital transactions will also provide access to financial services to those who are currently unbanked or underbanked.
Disadvantages of e-rupee:
Dependence on technology: The success of the e-rupee depends on the availability and reliability of technology. If the technology fails, the e-rupee will not be usable.
Risk of hacking: Digital transactions are vulnerable to hacking and cyber attacks. The e-rupee will also be vulnerable to these risks.
Risk of fraud: The e-rupee will also be vulnerable to fraud as digital transactions can be easily manipulated.
Lack of acceptance: The e-rupee may not be accepted by all merchants and businesses. This could limit its utility.
How e-rupee is different than Bitcoin?
Legal Tender: Bitcoin is a decentralized digital currency, while the e-rupee is a digital version of the Indian rupee and is considered legal tender.
Government control: Bitcoin is not controlled by any government or central authority, while the e-rupee is controlled by the RBI.
Volatility: The value of Bitcoin is highly volatile, while the value of the e-rupee will be stable as it is pegged to the value of the physical rupee.
Regulation: Bitcoin is not regulated, while the e-rupee will be regulated by the RBI.
In conclusion, the e-rupee is a digital version of the Indian rupee, intended for digital transactions. It offers increased security, convenience, and efficiency, but also has its own set of drawbacks. The e-rupee is controlled by the Indian government and is considered legal tender, while Bitcoin is decentralized and not controlled by any government. The e-rupee is also less volatile than Bitcoin.
Where will you add the eRupee created
M3
1 Components (1.1.+1.2+1.3+1.4)
1.1 Currency with the Public
1.2 Demand Deposits with Banks
1.3 Time Deposits with Banks
1.4 ‘Other’ Deposits with Reserve Bank
when eRupees are issued which of the following M3 components will increase
M3
1 Components (1.1.+1.2+1.3+1.4)
1.1 Currency with the Public
1.2 Demand Deposits with Banks
1.3 Time Deposits with Banks
1.4 ‘Other’ Deposits with Reserve Bank
Or will RBI create a new entry?