How to make e-rupee payments using UPI?

This makes transactions between retail digital rupee wallets compatible with UPI and consequently paving the way for wider adoption of electronic currency. 

Published: 11th September 2023 10:34 AM  |   Last Updated: 11th September 2023 10:34 AM   |  A+A-

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Express News Service

CHENNAI: While Central banks around the globe are pondering whether or not to issue digital currencies, Indian banks went ahead and introduced interoperability between the country’s digital payment platform - Unified Payments Interface (UPI) and Central Bank Digital Currency (CBDC). This makes transactions between retail digital rupee wallets compatible with UPI and consequently paving the way for wider adoption of electronic currency. 

What are CBDCs?

Digital Rupee (eS), a CBDC issued by the Reserve Bank of India (RBI) is a legal tender, similar to paper currency we use. It has sovereign guarantee and represents a direct claim on the central bank’s balance sheet. It can be used to carry out transactions or store value digitally and can be converted against commercial bank money and cash.

RBI launched CBDC- retail pilot program last December to test the process of digital rupee creation, distribution and retail usage in real-time. As per RBI, 14.6 lakh users and 3.1 lakh merchants are currently part of the pilot as on August 31, 2023.

Virtual currencies
CBDCs are completely different from cryptocurrencies such as Bitcoin, as they don’t have any intrinsic value and are not backed by assets or a sovereign guarantee.

UPI- CBDC interoperability
UPI- CBDC interoperability feature will allow users to scan any merchant UPI QR codes and pay with a digital rupee (retail) wallet. The merchant doesn’t need an e-rupee wallet or a separate QR code to accept the e-rupee payments from the sender.  Likewise, users can utilise their CBDC wallets to conduct transactions on the UPI QR.

Individuals can also transfer money to other individuals (Person to Person -P2P) with e-rupee.
How are interoperable systems advantageous?

At present, UPI has 35 crore registered users, and is expected to grow 3 times more and touch 100 billion monthly transactions, according to officials. A large number of people use UPI-based applications for day-to-day transactions, even for a small amount. 

This helps CBDC wallet users to tap into this network with e-rupee. This creates a huge base for widespread adoption of e-rupee.

Commercial banks believe that this integration will be a game changer for the digital payments ecosystem in the country and facilitate transition to a more cashless economy. 

It is also believed to enhance financial inclusion. The UPI interoperability feature will dramatically enhance the adoption of CBDC across the country, a senior banking official recently said.
Currently, a few 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 can you use eS? 
Retail users can download ‘Digital Rupee’ app by respective banks. To avoid a large-scale disruption, the RBI is rolling out digital rupee in a phased manner. Banks have pre-selected users and allowed customers from certain cities, mostly Metro cities and major tier-II cities, to use digital rupee applications. 

Each bank has introduced a dedicated ‘Digital Rupee’ mobile application for Android. While some banks have iOS applications, few are yet to release them.

 Users can download the respective bank’s digital rupee app
 Register using the same SIM card as mentioned in the bank account.
 Set up app PIN and authenticate with device password
 Enter name and click on Choose Wallet
 Select and link a particular bank account with the wallet.
 Click on the ‘Load digital Rupee’ option and transfer funds from a linked account or through different UPI apps.
 After verification, the linked account will be debited and the digital rupee wallet will be credited, in selected denominations, instantly.
eS will have the same denominations that are currently circulating paper currencies and coins. 

A person can create one wallet with one bank.
Users can download and register on the digital rupee applications. Once approved, the users will be notified through registered email or SMS to participate in the pilot program.

Wholesale user
The CBDC-Wholesale Pilot, launched on November 1 2022, restricted access to select financial institutions to settle secondary market transactions in government securities. RBI is planning to test some more use cases going forward.

What are the advantages of e-rupee?
If an individual loses the mobile phone, e-rupee wallet can be restored unlike physical wallets. RBI decided to issue digital currency to reduce operational cost involved in the physical cash movement, provide alternatives for cryptocurrencies, reduce settlement risk in the financial system,  cost-effective cross border payment systems and enhance financial inclusion.

Difference between UPI and CBDC
UPI is digital payments platform- a way to instantly transfer money between two bank accounts. 
UPI is a real-time digital payment option through an inter-bank interface.

And, e-rupee is a digital currency. It is a digital avatar of physical cash. 


  •  UPI- CBDC interoperability allows users to scan UPI QR codes & pay with e-rupees.
  •  CBDC wallet users can tap into 35 crore+ of UPI users for everyday transactions, creating a huge base for e-rupee adoption

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