Understanding e-Rupee and e-RUPI: Key Differences and Impact on Indian Economy

The Indian government, under Prime Minister Narendra Modi, has introduced a series of innovative payment solutions to combat corruption, enhance transparency, and modernize the financial system. Two significant initiatives in this regard are e-Rupee and e-RUPI. This article elucidates the distinctions between these two concepts and their potential impact on the Indian economy.

Introduction to e-RUPI

When was it launched? The e-RUPI was officially launched in August 2021, with a specific aim to address systemic issues like the misuse of government subsidies and benefits. This initiative is not a new currency but a payment voucher that operates on a unique protocol designed to prevent fraud and misuse.

How does it work? The e-RUPI operates on a three-part QR code system that ensures transparency. Here's a simplified breakdown:

The QR code is presented by the customer or the subsidy seeker. The second QR code belongs to the shopkeeper or other official transferring subsidies. The third QR code is held by a server to verify the transaction.

A transaction is considered valid only if the first and second QR codes match. This ensures that the subsidy is directed to the rightful recipient and prevents misuse.

Introduction to e-Rupee

When did e-Rupee come into existence? The e-Rupee, a digital currency issued by the Reserve Bank of India (RBI), was launched in two stages: the wholesale e-Rupee was launched on November 2022, followed by the retail e-Rupee in December 2022.

Differences from Traditional Payments: Unlike UPI, which requires a bank account for transactions, the e-Rupee operates on a similar principle but with a decentralized approach. It leverages Blockchain technology to store and facilitate transactions, ensuring that banks do not have direct access to transaction details.

Key Differences Between e-RUPI and e-Rupee

1. Nature of the Payment:

e-RUPI: A payment voucher designed to prevent misuse of subsidies. It works on a three-part QR code system for verification. e-Rupee: A digital currency that operates on Blockchain technology, allowing for decentralized and secure transactions.

2. Purpose:

e-RUPI: To enhance the efficiency of subsidy distribution and prevent misuse. e-Rupee: To modernize and streamline financial transactions, offering a secure and transparent digital alternative.

Advantages of e-Rupee

1. Enhanced Transparency and Security: The use of Blockchain technology helps in securing transaction details in a decentralized manner, ensuring that sensitive information remains private.

2. Use Cases:

Foreign Tourism and Investment: Facilitating smooth transactions for foreign tourists and investors, particularly when they need to purchase goods or services without internet access. Foreign Flights/Commercial Airlines: Enabling payments for goods and services on commercial flights without the need for internet connectivity.

Impact on Corruption Control

The introduction of e-Rupee represents a significant step in the government's efforts to control corruption. By directly transferring funds to end-users for benefits like gas subsidies or farmers' subsidies, the government aims to reduce the chances of corruption. This approach is especially effective in sectors like the Public Distribution System (PDS), where more than 500,000 retail shops have historically been controlled by political parties or their representatives, leading to massive corruption.

Wholesale Payments: Banks and financial institutions can use the wholesale e-Rupee for large transactions, reducing the chances of mismanagement and misuse.

Retail Payments: The retail e-Rupee can be used for everyday transactions, reducing the need for cash and enhancing transparency.

Devices designed to accept e-Rupee transactions, such as e-Rupee cards, have specific features that prevent misuse. For instance, a card distributed for specific government benefits can only be used for those purposes, making it impossible for recipients to engage in fraudulent activities.

Conclusion

The e-Rupee and e-RUPI initiatives are part of a broader strategy by the Indian government to modernize financial systems, enhance transparency, and combat corruption. These digital payment solutions have significant potential to revolutionize the way subsidies and other benefits are distributed and used, ultimately leading to a more efficient and equitable financial ecosystem in India.

Stay tuned for updates as the e-Rupee undergoes testing and is rolled out across various sectors. This long-term vision holds the promise of bringing about substantial improvements in governance and economic stability.