As India strides towards a cashless economy, two digital payment systems have emerged as front-runners: the Digital Rupee and the Unified Payments Interface (UPI). While both facilitate electronic transactions, they differ fundamentally in their nature, operation and scope. If you are new to digital banking, you need to know these differences to navigate the digital finance landscape.
What is Digital Rupee?
The Digital Rupee, as the name implies, is a digital form of India's physical currency. Created by the Reserve Bank of India (RBI), it represents a virtual counterpart to the paper notes and coins we use daily.
Much like the RBI oversees the physical rupee's issuance and circulation, it has sole authority over the Digital Rupee's production and regulation.
What is UPI?
UPI operates on a decentralised platform, connecting various banks and payment service providers. The National Payments Corporation of India (NPCI) developed UPI to enable real-time fund transfers between bank accounts without requiring private information like account numbers or IFSCs.
Know the difference between Digital Rupee and UPI
| Aspect |
Digital Rupee |
UPI |
| Issuance and regulation |
The primary authority responsible for issuing and governing the digital rupee is the RBI. |
The NPCI created UPI. It works as a network that connects banks and payment service providers. |
| Scopes of usage |
It aims to digitise the entire monetary system, encompassing everything from international trade to government benefit disbursements. |
UPI's focus is primarily on domestic peer-to-peer and merchant payments.
Its user-friendly interface and widespread adoption by businesses have made it a popular choice for splitting bills, sending money to friends and family, and shopping. |
| Centralisation vs decentralisation |
The centralised control over the Digital Rupee ensures its security and stability, as the Central Bank can monitor and safeguard the system. It aligns the Digital Rupee with the existing monetary policy framework, making it easier to integrate into broader financial transactions. However, this centralisation also raises concerns about privacy and potential government overreach. |
Its decentralised nature promotes choice for users, as they can select from multiple banking and payment apps. On the other hand, the lack of a central authority raises questions about oversight and standardisation.
|
| Transaction processes |
You essentially transfer digital tokens representing the rupee's value. |
It facilitates the movement of funds between bank accounts, acting as a bridge between different financial institutions. |
| Overall purpose |
It may revolutionise cross-border transactions, reduce reliance on intermediaries and enhance financial inclusion by providing a secure, government-backed digital currency. |
Its user-friendly interface and decentralised structure makes it an attractive option for day-to-day transactions. |
Also Read: What is Digital Rupee and how does it work?
Conclusion
Ultimately, the choice between the two systems may come down to your needs and preferences. For large-scale transactions or corporate banking requiring better security, the Digital Rupee could be the preferred option. Conversely, UPI's convenience might appeal more to those seeking hassle-free peer-to-peer or merchant payments.
For example, using the BHIM Axis Pay UPI app, you can make peer-to-peer and peer-to-merchant transactions easily. All you need to do is download the app from the Google Play Store or Apple App Store, input necessary details, set your UPI PIN and you are ready to use UPI!
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
