The history of money is a journey that spans thousands of years, transitioning from barter systems to precious metal coins, then to paper currency, and now advancing into the era of digital currencies, significantly influencing how societies operate. Currency notes are far more than mere pieces of paper; they embody the rich history, culture, and economic evolution of a nation. India, with its diverse cultural heritage and storied past, offers a captivating history of its currency.
The evolution of money reflects changes in the economy and payment systems over time.
India has achieved notable progress in digital payment innovation. Digital currency itself is not a new concept; we routinely make payments using digital methods like Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), and Immediate Payment Service (IMPS), which are secure, efficient, and available 24/7. Recently, the Unified Payments Interface (UPI) has revolutionised India’s economic system, becoming a global model for developing scalable, convenient, real-time payment systems. The primary goal of all digital payment methods is to provide an alternative to physical cash.
Digital currency also plays a crucial role in enhancing financial inclusion. It breaks down socio-economic barriers and addresses issues related to connectivity and physical banking infrastructure, allowing more people, particularly the underserved, to participate in the financial system. Digital currencies offer the benefit of conditional anonymity, like physical cash, and are expected to drive an increase in cashless transactions. This movement toward a cashless economy is likely to spur innovation in payment methods, providing consumers with diverse options.
India’s Central Bank Digital Currency (CBDC), known as the Digital Rupee (e₹), is a sovereign currency issued by the Reserve Bank of India. It is distinguished by trust, liquidity, settlement finality, and integrity. Launched in November 2022 for wholesale and December 2022 for retail use, India’s CBDC represents the next generation of seamless, ubiquitous, and anonymous payment modes, offering significant value to its users.
According to the International Monetary Fund, India is among the global frontrunners in developing CBDCs. In addition to advancing the financial landscape, the adoption of CBDCs can help reduce India’s financial burden related to printing, distributing, and storing physical currency.
The Digital Rupee, also known as e₹ or e-RUPI, is a legal tender and digital version of cash issued by the Reserve Bank of India. It holds the same value as physical money, with 1 digital rupee equating to Rs. 1 in cash.
The retail e-rupee (CBDC-R) is essentially a digital form of cash issued by the Central Bank in electronic form, available in the same denominations as current banknotes and coins. The digital rupee can be used for transactions via digital wallets or UPI, allowing users to store value digitally and make various types of payments.
The e-rupee is available electronically and functions as a prepaid voucher sent to the beneficiary’s mobile phone as an SMS or QR code.
Digital Currency for Economic Growth
The advent of digital currency signifies more than just the modernisation of the financial system. It has also become a strategic imperative for sustainable economic growth, driven by new and emerging technologies. In exploring and developing digital currencies, countries must collaborate closely with each other and private entities to push technological boundaries successfully. This progress must be underpinned by robust cybersecurity measures and a regulatory framework that adapts to changing customer needs and preferences.
India, with its innovative and successful India Stack, has the potential to help other nations unlock the economic foundations of identity, data, and payments on a large scale and work with like-minded countries to continue evolving in this field.
Conclusion
Digital currency holds the promise of transforming the financial sector and bridging geographical divides. By integrating smoothly with legacy systems and offering interoperability, digital currencies can significantly support trade and economic opportunities across nations. However, this impact must be balanced with governance that ensures these benefits reach all sectors of society.
