India’s digital payments landscape has seen a revolutionary transformation over the past decade, largely driven by the widespread adoption of the Unified Payments Interface (UPI). Seamless, instant, and free of charge for most users, UPI has become the go-to method for small payments—from buying groceries to splitting bills. However, with the Reserve Bank of India (RBI) launching the Central Bank Digital Currency (CBDC), commonly referred to as the Digital Rupee (e₹), a new chapter in digital transactions is unfolding.
This development raises an important question: Will the Digital Rupee eventually replace UPI for small-value transactions? As both systems offer digital modes of payment but operate on fundamentally different technologies and philosophies, understanding their roles, advantages, and limitations is crucial in assessing whether one could truly replace the other—or if they’re destined to coexist.
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Mr. Dipal Dutta, CEO, RedoQ said, the digital rupee is about expanding possibilities, not replacing existing systems. I see the digital rupee a complement to UPI that broadens the spectrum of payment options available to every Indian. UPI has increased access to real-time payments and led to unprecedented financial inclusion. The digital rupee, on the other hand, introduces the concept of sovereign currency, providing users with a direct, secure, and potentially anonymous way to transact, much like physical cash but with the added benefits of digital convenience. For small payments, both UPI and the digital rupee will coexist. UPI will continue to be ideal for banked consumers making instant transfers. The digital rupee, meanwhile, will be especially valuable in areas where formal banking is limited. Businesses will benefit from enhanced security, while consumers will enjoy greater choice and flexibility in how they pay.
Mr. Gaurav Bhagat, Founder, Gaurav Bhagat Academy highlighted, RBI’s Digital Rupee is an advanced step in India’s digital evolution, but I think it will not displace UPI for small payments, at least not yet. UPI has built an effortless, trusted, and rewarding ecosystem which is well embedded in the daily lives of millions. Its success lies in simplicity, large merchant acceptance, and the user experience provided by apps like PhonePe and Google Pay.The Digital Rupee, on the other hand, promises interesting possibilities, especially for offline and more discreet transactions. It brings us nearer to a world where digital payments are able to capture the anonymity and instantaneity of cash.
I view these two as not competitors, but collaborators. One establishes trust and infrastructure; the other reinvents digital currency itself.
As usual, embrace change, but with consciousness. Tech is the tool; value lies in how you use it.
Mr. Utkarsh Sinha, Managing Director, Bexley advisors said, India’s UPI stack is deeply entrenched, frictionless, and already ubiquitous for small-ticket transactions. It’s hard to see the digital rupee displacing that anytime soon.
– The Digital Rupee functions more like a wallet than a dynamic payment rail. In a country with high smartphone penetration, real-time banking, and Aadhaar-linked access, its utility is relatively narrow.
– It may offer some incremental benefits for offline or unbanked use cases—but those segments are shrinking fast. As of now, its adoption curve is likely to remain modest unless a compelling new use case emerges.
Mr. Dinesh Jotwani, Co-Managing Partner, Jotwani Associates highlited, the Reserve Bank of India’s Digital Rupee (e₹) is not envisioned as a replacement for the Unified Payments Interface (UPI) in the domain of small-value transactions. Rather, both instruments are expected to coexist, performing distinct yet complementary roles within India’s rapidly evolving digital payments ecosystem.UPI has emerged as the backbone of everyday retail transactions in India- enabling instant, cost-free, and interoperable transfers across banks, merchants, and platforms. Its simplicity, ubiquity, and seamless integration with consumer applications have positioned it as the default choice for routine expenditures, such as groceries, transport, and dining.
By contrast, the Digital Rupee functions as a sovereign Central Bank Digital Currency (CBDC)- a direct liability of the Reserve Bank of India. It introduces novel features such as offline payment functionality, programmability, and enhanced transactional anonymity, making it particularly suitable for cash-alternative scenarios, direct benefit transfers, and regions with limited connectivity.
Importantly, the two systems are interoperable: UPI can be used to seamlessly load Digital Rupee wallets, enabling users to move effortlessly between account-based and token-based payment mechanisms.
From a legal and policy standpoint, this dual-framework enhances user choice, systemic resilience, and financial inclusion. While UPI will likely continue to dominate day-to-day micro-transactions, the Digital Rupee reinforces monetary sovereignty and broadens the digital payment infrastructure.
Together, they represent a layered, future-ready architecture- anchored in transparency, efficiency, and regulatory oversight- designed to meet the diverse needs of India’s digital economy.
