How is e-rupee different from UPI | 5 Key takeaways from RBI press conference

Reserve Bank of India (RBI) Governor Shaktikanta Das explained at a press conference the difference between a digital rupee and a Unified Payments Interface (UPI). Speaking at the post-policy press conference, Das mentioned the differences between the two.

The context of the RBI clarification was the conversation in recent days after the launch of a retail central bank digital currency (CBDC) pilot within a closed user group about the roles of digital currency and UPI.

The Reserve Bank of India (RBI) started a pilot test of the digital rupee for individuals on December 1. The central bank has identified eight banks for the first two-stage project.

Here are five takeaways from the RBI's post-policy press conference.

Bank Intermediation
Das noted that transactions via UPI have to go through a bank, while in the case of digital currency, funds are transferred from one wallet to another without such intervention.

“Any UPI transaction involves the mediation of a bank…In a CBDC, just like fiat currency users go to a bank, withdraw currency and put it in their wallet, similarly, here too users can withdraw digital currency and save it on a mobile phone wallet and make payments," he said. Reserve Bank of India said, "digital currency will move from one person's wallet to another person's wallet without the mediation of the bank."

"UPI is the transfer of money between bank accounts, and the digital rupee is a form of currency payment. It is possible for two entities to receive the wallet and the funds can be moved between them, which is not possible with UPI because UPI you have to involve a bank for payment,” said RBI Deputy Governor T Rabi Sankar.

Anonymity
The governor added that anonymity is a key feature of the digital currency because the currency will be transferred directly from one wallet to another and therefore will not have a digital footprint.

Das added that, as in the case of the physical currency, also for the digital rupee, a third party cannot know to whom the money was transferred because such information is not available in a bank.

Sankar added that the Central Commercial Bank can enable the movement of funds directly between two private entities, natural or legal persons, as is the case of cash. However, at UPI, the movement is only between two bank accounts.

A PAN is required for CBDC
Currently, a person who makes a transaction that exceeds a certain limit must provide his or her personal account number. This was introduced to prevent illegal transfers and limit the flow of black money. Das said that the same rules apply to the newly launched digital currency.

“The Income Tax Department has certain limits for cash payments, such as, beyond a certain limit, you must provide a PAN number; the same rules will apply in the case of the central bank currencies, since they are both currencies”, added the governor.