State Bank of India allows CBDC users to link to UPI

Subject: Economy

Section: Monetary Policy

In News: SBI has introduces UPI interoperability in its Digital Rupee (e rupee).

Key Points:

SBI has introduced UPI interoperability in its Digital Rupee (e rupee), also known as the Central Bank Digital Currency (CBDC).
This feature is accessible through the ‘e rupee by SBI’ application and allows SBI CBDC users to scan merchant UPI QR codes for transactions.
SBI believes this integration will have a significant impact on the digital currency ecosystem. The bank strives to provide secure and efficient transaction solutions.
SBI was among the first few banks to participate in the RBI’s retail digital e-rupee project in December 2022.
SBI said the seamless integration of CBDC with UPI will enhance the acceptance and utilization of digital currencies in everyday transactions.
A few banks, including State Bank of India, Bank of Baroda, Kotak Mahindra Bank, Yes Bank, Axis Bank, HDFC Bank and IDFC First Bank, have introduced UPI interoperability on their digital rupee application.

What is UPI QR code-CBDC interoperability?

Interoperability of UPI with the digital rupee means all UPI QR codes are compatible with CBDC apps. Initially, when the pilot for the retail digital rupee was launched, the e₹-R users had to scan a specific QR code to undertake transactions.
However, with the interoperability of the two, payments can be made using a single QR code. The digital rupee issued by the RBI, or the CBDC, is a tokenised digital version of the rupee.
The e₹ is held in a digital wallet, which is linked to a customer’s existing savings bank account. UPI is directly linked to a customer’s account.
Interoperability of UPI and CBDC will ensure seamless transactions between a customer and merchant without having the need to switch between multiple digital platforms.