“Success is not the result of making money, money is the result of success.”

Launch of e-rupi by the government is a major step towards issuance of Swadeshi Digital Currency by India. Having experienced the convenience of online payment during lockdowns, people are mentally oriented towards adoption of virtual currency, which saves many lives due to physical coins and notes not exchanging hands between affected and unaffected people. Further the charm of a mobile phone substituting the orthodox pocket purse with unlimited carrying capacity of money round the clock has also lured masses to digital currency. The government on its part finds virtue in virtualizing the currency to save costs of printing, storage, safety, transportation. It also helps government plans of saving gullible aspirational Indians from getting fleeced into the volatile world of Bitcoins where stakes by nouveau riche Indians are growing into billions of dollars by leaps and bounds. 

The virtual rupee or e-rupi has been developed by the National Payments Corporation of India (NPCI) on UPI platform, in association with the Department of Financial Services, Ministry of Health & Family Welfare and National Health Authority. The e-rupi connects sponsors of  services with the beneficiaries and service providers in a digital manner without any physical interface. The payment system ensures that the payment to the service provider is made only after the transaction is completed. e-RUPI is a cashless and contactless digital payments medium, which will be delivered to mobile phones of beneficiaries in the form of an SMS-string or a QR code. 

The users of this one-time payment mechanism will be able to redeem the voucher without a card, digital payments app or internet banking access, at the service provider. As e-rupi is prepaid in nature, it assures timely payment to the service provider without the involvement of any intermediary. Besides, these digital vouchers can be used for employee welfare and corporate social responsibility programmes. 

A few weeks before the launch of e-rupi, the RBI Deputy Governor announced that India’s central bank is considering launching a digital currency in a “phased” manner through legal changes to  foreign-exchange rules and IT laws. The digital currency, called CBDC [central bank digital currency]  will be backed by sovereign guarantee, to lower the economy’s reliance on cash, enable cheaper and smoother international settlements, and protect people from the volatility of private cryptocurrencies. Digital currency shall reiterate India’s leadership position in payment systems of the world. It would provide significant benefits, like reduced dependency on cash, low transaction costs and reduced settlement risk. Introduction of CBDC would lead to robust, efficient, trusted, regulated and legal tender-based payments options. The launch on a population scale in a phased strategic way with little disruption of India’s banking and monetary systems shall be a game changer.

The CBDC is a currency that does not pay interest, its impact on bank deposits may be limited. Depositors that require CBDC for transactional purposes may sweep day end balances to interest-earning deposit accounts. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. It is not meant to replace fiat currencies but to complement them. The significant contribution of CBDC would be enabling the government’s vision to shift towards a truly cashless economy.  RBI’s support to such currency will ensure its financial stability. 

Indians invest billions of dollars in cryptocurrencies like Bitcoin, Dogecoin, Ethereum, Binance, Ripple, Matic regularly. The trading volume of cryptocurrencies has gone up after the nationwide lockdown of last year. As per Bloomberg, Indian investment in cryptocurrencies grew from $923 million in April 2020 to $6.6 billion in May 2021. Nearly 1.5 crore Indians hold Rs 15,000 crore worth of cryptocurrency assets presently. The prices of cryptocurrencies have skyrocketed in the past six months. Bitcoin was the top-performing asset class of FY 2020-21, delivering returns of over 800%. However, being highly volatile it crashed by 30% and is now quoted around USD 40,000 per piece !

The irony is that cryptocurrencies are suitable for aggressive investors often using ill gotten wealth to quick gains. It’s similar to investing in penny stocks, which may give extremely high returns in a short time, or lose the entire amount overnight. Despite the apparent risks associated with crypto investments, glib advertising, word of mouth campaigns and the lure of quick returns are driving many people towards crypto captivation.

Considering present day Bitcoins holding such a negative image of being a destination investment of filthy rich with questionable funding and reported use for nefarious money laundering through cross border wanton flights, it is difficult to imagine our father of Nation, Mahatma Gandhi adoring the Swadeshi Bitcoin. But the issue of India’s maiden virtual currency for masses rather than for classes is diametrically opposite to the existing image and usage of bitcoins which are identified as instruments of opulence of the rich. India currency may also be on blockchain but shall carry sovereign guarantee. The currency shall operate as a substitute for cash and made stable through monetary monitoring. The exercise may herald as a cursor to making crypto currency as a coin of common man across geographies. 

India’s yearning to kiss the five trillion benchmark for GDP is carried on the shoulders of Gandhian philosophy of inclusive growth.  Greater the emphasis on use of digital currency by masses, greater the opportunity to reduce individual losses. It is very likely that Mahatma Gandhi will  adore India’s digital currency as well as it is a stable alternative currency of India’s physical currency whose toil and sweat has made India one of the largest and fastest growing economies of the world, through indigenous inclusive growth. 

“Everyone has a different clock, so wait for your time”

(Mr. Hargovind Sachdev has over 39 years of banking experience having occupied senior positions in UCO Bank, United Bank of India, State Bank of Patiala, State Bank of Travancore & State Bank of India where he headed the Central European Credit Desk at Frankfurt, Germany from 2006 to 2011 covering 15 countries of Central Europe.)