The Prime Minister launched the e-RUPI digital payment system in August 2021. This isan important step in ensuring government benefits and services reach their intended beneficiaries in a timely manner. In this epiode, you will learn all about the e-RUPI system, how it works, what are its advantages and disadvantage There are already many countries using the voucher system for example the US, Colombia, Chile, Sweden, Hong Kong, etc.

What is e-RUPI?
• It is a cashless and contact less method for digital payment. It is a Quick Response (QR) code or SMS string-based e-voucher, which is delivered to the mobile of the users.
o The users will be able to redeem the voucher without needing a card, digital payments app, or internet banking access, at the service provider.
o It connects the sponsors of the services with the beneficiaries and service providers in a digital mode without any physical interface.
o The mechanism also ensures that the payment to the service provider is made only after the transaction is completed.
o The system is pre-paid in nature and hence, assures timely payment to the service provider without the involvement of any intermediary.

How does e-RUPI work?
The person should show this QR code or string at the service provider (like a hospital or PHC) where it will be scanned by the merchant. Then, a verification code will be sent to the beneficiary’s phone which would have to be shared with the merchant, and the payment would be successful.


HOW Different from Virtual Currency?
In effect, e-RUPI is still backed by the existing Indian rupee as the underlying asset and specificity of its purpose makes it different to a virtual currency and puts it closer to a voucher-based payment system.

How are the e-RUPI vouchers issued?
• The e-RUPI system has been developed by the NPCI on its UPI platform and has onboarded banks that will be the issuing entities.
• Government agencies/corporations will approach the partner banks and give them the details regarding the beneficiaries and the purposes for which payments will have to be made.
• Beneficiaries are identified using their mobile numbers. The voucher is allocated to the service provider (merchant) in the name of the beneficiary and only this would be delivered to the intended beneficiary.
• Some of the partner banks are ICICI Bank, SBI, Axis Bank, HDFC Bank, Bank of Baroda, Punjab National Bank, Indus Ind Bank and Canara Bank.

• Government Sector:
▪ It is expected to ensure a leak-proof delivery of welfare services and can also be used for delivering services under
schemes meant for providing drugs and nutritional support under Mother and Child welfare schemes, drugs & diagnostics under schemes like Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, fertiliser subsidies etc.
• Private Sector:
▪ Even the private sector can leverage these digital vouchers as part of their employee welfare and Corporate Social Responsibility (CSR) programmes.
The government is already working on developing a Central Bank Digital Currency and the launch of e-RUPI could potentially highlight the gaps in digital payments infrastructure that will be necessary for the success of the future digital

• According to the Reserve Bank of India (RBI), there are at least four reasons why digital currencies are expected to do well in India:
• Increasing Penetration:
o There is increasing penetration of digital payments in the country that exists alongside sustained interest in cash usage, especially for small value transactions.
• High Currency to GDP Ratio India’s high currency to Gross Domestic Product (GDP) ratio holds out another benefit
of Community Business Development Corporation (CBDC)
• Cash-to-GDP Ratio or Currency in Circulation (CIC) to GDP Ratio or simply currency-to-GDP ratio shows the value of cash in circulation as a ratio of GDP.
• Spread of Virtual Currencies
o The spread of private virtual currencies such as Bitcoin and Ethereum may be yet another reason why CBDCs become important from the point of view of the central bank.
• Will Act as a Cushion
o Central bank digital currencies might also cushion the general public in an environment of volatile private virtual currencies Limitations of e-RUPI
A concern with the system is that with the beneficiary not required to disclose their identity, these vouchers are also likely to be claimed by other people.

Is e-RUPI a Digital Currency?
No, e-RUPI is not a digital currency. It is a social service voucher system to ensure benefits reach the intended eligible beneficiaries without any discrepancies and delays. However, it can be seen as a first step towards having a digital currency in that the experience can help the government learn more about the digital payments architecture,
and the loopholes in the system.