UPSC Previous Year Question | Prelims GS | 2024

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?

  1. 1 and 2 only
  2. 1 and 3 only
  3. 2 and 4 only
  4. 1, 2 and 4

Answer

Correct Answer

1, 2 and 4

Explanation

Statements 1, 2 and 4 are correct. The digital rupee (e₹) is a digital form of sovereign currency issued by the RBI; like physical currency, it is an RBI liability. It is intended to be interchangeable at par with cash and commercial bank money. Statement 3 is incorrect: the digital rupee is denominated in rupees and is not inherently protected against inflation. Its digital form does not preserve purchasing power if the general price level rises.

Topics: central bank digital currency, digital finance, digital rupee characteristics, indian economy