Is e-RUPI the Pathway to RBI's Digital Currency?

The United Payments Interface (UPI)-based e-RUPI has swirled around a lot of speculations among financial experts post its launch by Prime Minister Narendra Modi on August 2, 2021.


The launch has left experts skeptical whether it is a digital gift card? or is it a Sodexo-like instrument? Whether it can it be a precursor to India’s plans to launch a Central Bank Digital Currency?

The e- RUPI was launched after RBI Deputy Governor R Rabi Sankar said the regulator was working towards a phased implementation strategy of the Central Bank Digital Currency (CBDC), prompting whispers of e-RUPI’s ties to the CBDC.

The unique feature and motive of e-RUPI is to avail leak-proof welfare services by using a one-time payment mechanism. Another added benefit is the offering eliminates middlemen and ensures that the sponsors of the service connect directly to the beneficiaries.

Moreover, the newly launched platform does not require the beneficiary to have a bank account – unlike other digital payments methods which demand a mandatory bank account.

The launch event was attended by Reserve Bank of India (RBI) Governor Shaktikanta Das and various heads of banks including Sashidhar Jagdishan, MD & CEO of HDFC Bank and Rajkiran Rai G, CEO of Union Bank of India. At the event, Prime Minister Narendra Modi said, “Besides being person-specific, the e-RUPI is also purpose specific. It will ensure that the benefit will be used only for the purpose that it is being provided.”

To avail additional information about the launch, Former RBI Deputy Governor R Gandhi said that e-RUPI is not the same as a CBDC. “E-RUPI is not CBDC, both are completely different concepts. Here money is not being created; money is already available with the benefit provider which it wants to transfer to the platform for the beneficiary. The key difference is here there is no money created, whereas in CBDC there will be money creation.”

The e-RUPI resembles a digital gift card, thereby replacing physical vouchers. The usage of the card can be done by private companies, government institutions and other service providers to extend benefits by amalgamating with its partner banks. As per reports, eleven banks are currently live with the service.

Former Economic Affairs Secretary SC Garg adds that, “The e-RUPI can fulfill some requirements for extending benefits which were not fulfilled by earlier instruments. It is not a currency. Currency should be a bearer instrument that can be transferred and can be further used. Here it is personalized and purpose-specific – it’s not money, forget digital currency, it’s not even currency.”

The only requisite of E-RUPI from the beneficiary is to have a mobile phone to which the sponsor can share the pre-paid voucher via simply an SMS or a QR code.

Raza Co-Founder of Crypto Kanoon explains that, “Whenever the government wants to extend monetary benefits like Direct Benefit Transfers (DBT) to migrants during the pandemic, for example, tracking the beneficiaries was a challenge. Now they can share the funds with e-RUPI by just having a database. Additionally, the elimination of a bank account helps ensure that the beneficiary is not dependent on anyone to avail the benefits.”

He further adds that the entire purpose of CBDC sets it apart from e-RUPI, but he sees commonalities. “I cannot compare both products. But the only similarity between crypto currencies and e-RUPI is that both do not rely on middlemen, transfers happen directly to whoever it is intended for.

However, the platform is expected to ease the entire process of giving vouchers and subsidy benefits and is expected to be widely adopted by private players and government bodies alike.

Rajesh Mirjankar, Chief Executive Officer and Managing Director of InfrasoftTech, which is providing the e-Rupi technology stack to two of the 11 banks says, “I have seen tens of thousands of vouchers being generated with one of the banks already. The immediate use case is for corporates to extend vaccination to employees, so this has come at the right time as vaccination against COVID-19 is the need of the hour.”

He added that “Corporates had to tie-up with particular hospitals, now they can just share the amount via e-RUPI and employees can avail vaccination across the country.

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