The central bank is currently testing the robustness of the entire process of digital rupee creation, distribution and retail usage in real-time. It is expected to be used for payments and transactions.
The digital rupee (e₹-R) would be distributed through banks. According to RBI, users can make transactions with digital rupees through a digital wallet offered by participating banks and stores on mobile phones/devices. While several other use cases may come up in future, the digital rupee, on its own, won’t earn interest like deposits in a savings account.
Why Digital Rupee doesn’t earn interest
The digital rupee is like a digital iteration of physical cash, issued as digital tokens in the same denominations as paper currency notes. Just like cash sitting in your wallet doesn’t interest on its own, the digital rupee also doesn’t earn any interest while you keep it in your digital wallet. The digital wallet to hold e₹-R will be offered by banks.
Can you do Fixed Deposit with digital rupees?
As you can earn interest by depositing cash in the bank, you may be able to do the same with the digital rupee also in future. Even the Government says that it may be converted into other forms of money like deposits with banks.
“The e₹-R is in the form of a digital token that represents legal tender. It is being issued in the same denominations as the paper currency and coins. It is being distributed through banks. Users will be able to transact with e₹- R through a digital wallet offered by the participating banks. Transactions can be both Person to Person (P2P) and Person to Merchant (P2M),” Union Minister of State in the Ministry of Finance Pankaj Chaudhary said in a written reply to a query in Rajya Sabha on Tuesday (December 13, 2022).
“The e₹-R offers features of physical cash like trust, safety and settlement finality. As in the case of cash, it does not earn any interest and can be converted to other forms of money, like deposits with banks,” he added.
