e-Rupi: Government’s Revolutionary Initiative to cater India’s Appetite for Digital Currency

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The Indian Government has taken another step forward towards digitalizing the currency system in the country with the launch of an electronic voucher programme on August 2, 2021. E-Rupi, as the name goes, is a contactless digital payment instrument that has officially stepped into the Indian market and will give you the flexibility to make payment at any point in the country.  

This person and purpose specific payment system has been developed by the National Payments Corporation of India (NPCI) on its UPI platform in collaboration with the Department of Financial Services, Ministry of Health and Family Welfare and the National Health Authority. Many banks have also been linked to play a major part of it as an issuing institution. 

State Bank of India, HDFC Bank, Axis Bank, Punjab National Bank, Bank of Baroda, Canara Bank, IndusInd Bank, and ICICI Bank have come on board as partners. 

The way it works 

e-RUPI, being a cashless digital payment medium, will be delivered to mobile phones of beneficiaries in form of an SMS-string or a QR code. This will essentially be like a prepaid gift-voucher that will be redeemable at specific accepting centres without any credit or debit card, a mobile app or internet banking.  

To complete the transaction, the beneficiary will need to present a QR code or SMS message to the retailer, who will scan it and send a verification code to the beneficiary’s mobile phone number. The latter will be required to share the code with the merchant in order for the transaction to be successful. The beneficiaries will be identified using their mobile number and a voucher allocated by a bank to the service provider in the name of a given person would only be delivered to that person.  

 According to Think360 Co-founder Monish Salot,  

The instrument allows users to make digital payments – not just in a traditional digital sender to digital receiver way, but also in a digital sender to offline receiver manner. 

The main objectives behind the system 

The primary goal behind e-RUPI is to minimise the digital gap among the unbanked population of the country. 

The main objective and long-term vision behind e-RUPI is to reach 190 million unbanked citizens, fold them into a formal financial system, and close part of the digital gap. This digital payment system can provide equal access to financial, healthcare, and welfare services to each and every citizen of our country,  

Says Hitesh Malviya, founder of itsblockchain.com 

Considering that the consumer redeeming the voucher need not have a digital payment app or a bank account, e-RUPI focuses to overcome the limitations of the Direct Benefit Transfer (DBT) system which requires the trinity of JAM (Jan Dhan account, Aadhaar and Mobile) as enabler, i.e. various government financial, healthcare, and welfare schemes and benefits can be availed even without having a bank account. 

 As evidenced by India’s high cash-to-GDP ratio of 14.7 percent – the highest in two decades, as per information from the RBI, this new framework is expected to further motivate and speed up the acceptance of technology-based payments, lowering the country’s cash dependence even further. 

The system holds immense possibility 

This seamless one-time payment mechanism is easy, safe and secure as it keeps the details of the beneficiaries completely confidential. The entire transaction process through this voucher is relatively faster and at the same time reliable, as the required amount is already stored in the voucher.  

Public sector lender Union Bank of India has implemented the system by conducting a vaccination drive at Thane region through e-Rupi prepaid voucher module, an innovative digital solution recently introduced by National Payment Corporation of India (NPCI). The bank said that the major benefits of e-Rupi are end-to-end digital transaction leading to cost reduction; voucher redemption can be tracked by the issuer; quick, safe and contactless voucher distribution; quick redemption process; lesser decline due to pre-blocked amount and the fact that no digital or bank presence is required. 

Private sectors can also take advantage of E-Rupi. They can just leverage vouchers under employee welfare programs. 

E-Rupi may turn out as the game-changer  

The Reserve Bank of India had recently said that it has been working towards a phased implementation strategy for central bank digital currency or CBDC. From increasing penetration of digital payments in the country to the spread of private virtual currencies such as Bitcoin and Ethereum, RBI points out a number of reasons why digital currencies are expected to do well in India. 

E-Rupi can thus be considered as the first step to highlight the gaps in digital payments infrastructure that will be necessary for the success of the future digital currency. In effect, e-RUPI is still backed by the existing Indian rupee as the underlying asset and specificity of its purpose makes it different to a virtual currency and puts it closer to a voucher-based payment system. 

This system is also expected to stand out as a boon for the non-smartphone population of the country who had been struggling to adopt the digital payments since long. This will allow them to gradually use and accept digital methods, which heralds well for the coming years. 

However, the potentials of e-RUPI in near future will depend on the end-use cases. 

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