1 / 7The Reserve Bank of India (RBI) on Tuesday announced the launch of the first pilot for retail digital Rupee or e-rupee on December 1. To start with, the RBI has partnered with four banks including State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank in Mumbai, New Delhi, Bengaluru, and Bhubaneswar. Initially, RBI said, the pilot would cover only the closed user group (CUG) comprising participating customers and merchants.2 / 7Digital Rupee in itself will be the underlying payment mode that can be used for digital payments in lieu of currency/cash. “The payment rails like UPI, IMPS etc use the underlying currency/cash to transfer the funds. In this case, it is expected that payment rails will work together with the digital rupee to ensure a seamless payment transaction,' said Mihir Gandhi, Partner & Payments Transformation Leader, PwC India.3 / 7Currently, UPI payments are made using the digital equivalent of existing currency notes. That means every rupee transferred via UPI is backed by physical currency. “The digital rupee will be legal tender in and of itself and need not necessarily be backed up by physical currency,' said Sumit Gwalani, Co-Founder, Neobank Fi.4 / 7As the RBI explained, the e-Rupee is a form of digital token that represents legal tender. Unlike cryptocurrencies, the digital Rupee is issued in the same denominations as paper currency and coins.5 / 7The digital rupee is no different from your normal rupee it can be used to do normal transactions like NEFT, UPI. The digital rupee will be operated by RBI and not by bank intermediaries in the case of UPI where each bank has a different UPI handler, said Manoj Dalmia, Founder and Director, Proassetz Exchange6 / 7The central bank also confirmed that the transaction in digital Rupee can happen between Person to Person (P2P) and Person to Merchant (P2M). Users will be able to make payments through e-Rupee using QR codes displayed at merchant locations, just like online transactions are done.7 / 7UPI payments currently rely on the settlement of the transacting banks with the RBI, Digital Ruppe will be transacting directly from RBI, hence it will be settled instantly.