TechnologyDigital e-rupee & UPI QR Code Interoperability: How does it work, advantages?

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Digital e-rupee & UPI QR Code Interoperability: How does it work, advantages?

Digital e-rupee & UPI QR Code

The Reserve Bank of India (RBI) recently launched the digital rupee with the aim of a cashless economy. Just after that, the banks enabled the interoperability of UPI Code with Central bank digital currency (CBDC). This now allows the users of the digital rupee to make transactions by scanning any UPI QR just like before. This integration is an ongoing pilot project by RBI to push the retail digital rupee along the likes of already successful UPI.

Interoperability with Digital Rupee and UPI QR Codes

With interoperability, users can now clear and settle payment transactions across various systems without participating in multiple systems. According to RBI, it offers and contributes to co-existence, adoption, and increased efficiency.

Image Credits: Ministry of Electronics & IT

In simple words, it means that all UPI QR codes are compatible with CBDC apps. Prior, the users had to scan through separate apps to use CBDC. But now, a single QR code can be used for payments be it UPI or CBDC. 

What is the Digital Rupee or e-rupee | What is CBDC

The Digital Rupee is issued by the Reserve Bank of India (RBI) or CDBC (Central Bank Digital Currency) which is a tokenized digital version of the rupee. It is held in a digital wallet, which is in turn linked to a customer’s existing savings account. Whereas UPI is directly linked to a customer account and involves no wallet service in between. 

Advantages to the interoperability include no need to switch multiple platforms. It provides seamless transactions between a merchant and a customer. The interoperability allows users to use their digital rupee, while merchants also need to maintain a single QR Code as well. 

According to RBI’s Deputy Governor: “We will take advantage of the UPI network to increase transactions in CBDC. There will be one QR code, and you can scan the QR code using the CBDC app. If the merchant has a CBDC account, the payment will be settled in the CBDC wallet. If a merchant does not have a CBDC account, then there will be an option to make payment using UPI,”

Currently, UPI is a widely used payment method, and interoperability allows the e-rupee to get popular among the masses. As of now, banks like the State Bank Of India, Bank of Baroda, Kotak Mahindra Bank, Axis Bank, IDFC Bank, and HDFC Bank have introduced the interoperability feature. It is soon expected to be rolled out into multiple back as time passes.

The main question that still remains is why the e-rupee when UPI is working and flourishing so well in India. What difference does it bring to the table other than a wallet? Let us know your thoughts in the comments below.  

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