What exactly is the e-Rupee?
In simple terms, the e-Rupee is the digital avatar of the currency notes and coins in your wallet. The mobile wallet provided by your bank can be used to either transfer funds to another individual, or pay for goods. Settlement is instantaneous, like in the case of a cash payment. With the e-Rupee, users will also experience the same features as cash, such as trust, safety, and settlement finality.
How will it work?
The retail CBDC will run on a digital ledger-based architecture where banks act as nodes for the network. Such CBDC models are called indirect or intermediated models, where banks perform checks for know-your-customer or anti-money-laundering requirements.
The digital currency will be transferred to users through their respective banks. The banks will provide the digital currencies in specific denominations in a designated mobile wallet, which can then be used to make payments.
Since the e-Rupee is legal tender, it can only be issued in specific denominations, as allowed by law. The RBI Act of 1934 allows the central bank to issue currency notes in certain denominations, such as two rupees, five rupees, Rs 10, Rs 20, Rs 50, Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000.
Will it earn interest?
The CBDC is the digital expression of cash. So just like cash in your wallet, the e-Rupee will also not earn you any interest.