Consider the following statements in respect of the digital rupee: 1. It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy. 2. It appears as a liability on the RBI’s balance sheet. 3. It is insured against inflation by its very design. 4. It is freely convertible against commercial bank money and cash. Which of the statements given above are correct?

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YESPYQ · Accepted Answer

Correct answer: 1, 2 and 4 UPSC GS Paper-I PYQs 270. The Central Bank Digital Currency (CBDC), or Digi- tal Rupee (e₹), is the Reserve Bank of India’s official digital cur- rency, interchangeable one-to-one with fiat currency and recog- nized as legal tender. It can be used by individuals, businesses, and government entities for transactions without needing a bank account, especially in the case of retail CBDC, which works like digital cash. CBDCs help reduce the costs of printing, transporting, and storing physical currency while improving transaction efficiency by minimizing intermediaries and enabling faster payments. Statement 1 is correct : The Digital Rupee (e₹) is issued by the RBI as Central Bank Digital Currency (CBDC) and functions as legal tender, just like physical cash. Its issuance is aligned with monetary policy objectives, including promoting financial in- clusion and reducing dependency on cash. Statement 2 is correct : Since the Digital Rupee is an obliga- tion of the central bank, it is recorded as a liability on RBI’s balance sheet, similar to physical currency no

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