The Government of India spends over INR 3 trillion on subsidies: food, fertilisers, healthcare and cash transfer. However, a significant chunk is lost before it reaches the person it was meant for, sometimes due to inefficiency and sometimes to middlemen. And even when the money does reach the beneficiary, they are more often than not unable to obtain the subsidised product. Occasionally, this is due to supply shortages, but more commonly, it is because their credentials do not match the records or because they had to use the money earmarked as productive funds on emergency or sustenance expenses.

This is where cash fails. Cash has always been anonymous. That’s not a bug to fix, but a structural feature, anonymous and frictionless, that makes physical currency useful for everyday commerce but not for welfare delivery. The government needs money that can do more: money that can be traced! India has been building that kind of money for a few years now. Two instruments, introduced by two different institutions, are working to address the same underlying problem from different angles.

e-Rupee (e₹) & eRUPI

e-Rupee, India’s Central Bank Digital Currency (CBDC), a legal tender equivalent to banknotes, was introduced by the RBI in late 2022. It works just like cash, used to buy and sell across the economy, except it’s digital and programmable. 

The National Payments Corporation of India launched eRUPI in 2021, in partnership with the Department of Financial Services and the National Health Authority. It is akin to a purpose-specific coupon. 

Same pronunciation. Completely different tools. And together, they sketch out a very different future for how public money may flow.

There are two forms for e-Rupee: a retail version for everyday person-to-person and person-to-merchant payments, and a wholesale version that operates exclusively between financial institutions. Around 19 banks are part of ongoing pilots for retail CBDC, alongside fintechs like Cred and Mobikwik. A recent deployment of e-Rupee in the Public Distribution System (PDS) in Gujarat, enabled beneficiaries to carry programmable e-Rupee in their digital wallets, redeemable at fair price shops via QR code, for the foodgrains they are entitled to. It is intended to ensure that there are no repeated biometric authentication or intermediaries necessary, while creating a real-time digital trail for actual accountability.

eRUPI works differently. It’s a non-transferable, purpose-specific, one-time voucher; not money you can spend anywhere, but a voucher locked to a specific use. It reaches beneficiaries as a QR code or an SMS and does not require them to have a bank account. The constraint is precisely the point. It can be redeemed only at specific merchants for specific purposes, making it remarkably powerful for welfare delivery. In healthcare, it ensures medical assistance is used only for designated services. In agriculture, subsidy funds can be locked to seeds, fertilisers, or equipment, not diverted elsewhere. In PDS, it ensures ration subsidies are redeemed only at authorised shops, with every transaction logged digitally.

Think of it this way. If the e-Rupee is a programmable note in your wallet, eRUPI is a gift card that only works at one store, for one thing, once. Both are designed so the money goes exactly where it’s supposed to. Nothing more, nothing less.

What this means in implementation

The infrastructure is built for public welfare and is an open field for startups to build on. Both the e-Rupee and eRUPI are programmable money rails. The immediate opportunity is in the tooling: merchant interfaces, wallet UX and redemption flows that actually work at the ground level. The bigger and harder-to-crack opportunity is in extending the architecture beyond government use cases. Some examples include: corporate disbursements tied to specific vendors; insurance payouts that can be used only for approved treatments; employee benefits that are purpose-bound by design. Their constraint models are not unique to welfare. They are general-purpose mechanisms for anyone who wants to send money with conditions attached.

However, while the ambition might sound clean on paper, the execution is harder. A QR code redemption flow needs to be as smooth as the UPI QR flow. Last-mile infrastructure, merchant readiness and user digital financial literacy remain urgent areas that need to be addressed.

(Published May 2026)