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3) UPI vs CBDC.md

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  • UPI

    • Now if I wish to make a transaction of 100 rupees from my bank account (SBI) to the merchant's account (AXIS) via phonepe or google pay, then both SBI and AXIS bank would be involved in enabling UPI to make the transaction of 100 rupees.
    • So to summarize, UPI requires the involvement of commercial banks.

  • CBDC

    • Central Bank Digital Currency doesn't require the involvement of commercial bank
    • As quoted by RBI, the key motivation for exploring the issuance of CBDC in India among others include reduction in operational costs involved in phisical cash management.
    • CBDC want to take power or accountability from these commercial banks and invest them in RBI which is indirectly controlled by the government.
    • Now, CBDC is said to improve Direct Benifit Transfer.
    • Government is now coming up with a voucher system called e-RUPI and this e-RUPI or vouchers will be directly sent to the phones of the customers and they can avail the credits assigned to them.

Disadvantage

A lot of money has already been spent on JAM trinity (Jan Dhan-Aadhaar Mobile) which is an initiative that to link Jan Dhan accounts, mobile numbers, and Aadhaar cards of Indians to plug the leakages of govt subsidies