UPI QR Code Central Bank Digital Currency

UPI QR Code Central Bank Digital Currency


  • With banks enabling the interoperability of Unified Payments Interface’s (UPI) Quick Response (QR) code with their central bank digital currency (CBDC) or e₹ application, users of retail digital rupee will be able to make transactions by scanning any UPI QR at a merchant outlet.
    • Merchants can also accept digital rupee payments through their existing UPI QR codes.
    • This integration of UPI and CBDC is part of the Reserve Bank of India’s (RBI) ongoing pilot project on pushing the retail digital rupee (e₹-R).

So, what is interoperability?

  • Interoperability is the technical compatibility that enables a payment system to be used in conjunction with other payment systems, according to the RBI.
  • Interoperability allows system providers and participants in different systems to undertake, clear and settle payment transactions across systems without participating in multiple systems.

    UPI QR Code-Central Bank Digital Currency
    Photo Credit: Times of India
  • Interoperability between payment systems contributes to achieving adoption, co-existence, innovation, and efficiency for end users.

And 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.

How will it benefit customers and merchants?

  • The interoperability of UPI and CBDC will ensure seamless transactions between a customer and merchant without having the need to switch between multiple digital platforms.
  • It will allow a digital rupee user to make payments for their daily needs, such as groceries and medicines, by scanning any UPI QR codes at any merchant outlet.
  • Even merchants are not required to keep a separate QR code to accept the digital rupee payments.
  • They can accept CBDC payments on their existing QR code.

What is a QR code?

  • A Quick Response (QR) code consists of black squares arranged in a square grid on a white background, which can be read by an imaging device such as a camera.
  • It contains information about the item to which it is attached, according to the National Payments Corporation of India (NPCI).
  • QR code is an alternate contactless channel of payments.
  • It allows merchants or businesses to accept payments from their customers directly into their bank accounts.

Source: IE

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