Advantages and disadvantages of e-Rupee

The pilot launch of e-₹ (e-rupee) for retail customers in Delhi, Mumbai, Bengaluru and Bhubaneswar from December 1 has got everyone excited about its vast potential.

While some are already calling it a game-changer as it eliminates the role of banks and can be used for transactions from a basic phone with no internet, we objectively look at the pros and cons of e-Rupee to help you form an opinion.

But do bear in mind that e-Rupee is still at a very early stage and our assessment is based on information available to us at this point of time.

What's in it for you
While e-Rupee is a step towards digital currency, it is, in effect, a voucher system that will help beneficiaries receive government benefits and subsidies quickly and easily. At least, that's what it looks like in the initial stages.

Moreover, e-Rupee will not earn you any interest, whereas your money in a bank account (in the case of UPI) helps you earn at least 3.5 per cent interest. Hence, for now, e-Rupee seems like a government initiative to promote financial inclusion, while UPI is a better option for people with smartphones and internet access.

That said, things will take an interesting turn if UPI players start charging transaction fees - known as merchant discount rates (MDR) - of 0.1-0.9 per cent for each payment. While banks and the RBI are bearing MDR at the moment, and the government came under instant pressure some time back for even thinking of passing the burden on to the public, any regulatory changes in future will compel us to come back to the drawing board for a rethink.

Suggested read: How e-Rupee can be better than UPI?

This article was originally published on December 22, 2022.