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 ?
- (a) 1 and 2 only
- (b) 1 and 3 only
- (c) 2 and 4 only
- (d) 1, 2 and 4 ✓ UPSC's answer
Why the answer is (d)
• The digital rupee (e₹), piloted by the RBI from late 2022, is India's central bank digital currency.
• Statement 1 is correct: it is legal tender issued by the RBI as sovereign currency, consistent with its monetary policy, in the same denominations as notes and coins.
• Statement 2 is correct: like banknotes, e₹ in circulation is a liability on the RBI's balance sheet.
• Statement 4 is correct: it is exchangeable one-for-one with cash and with commercial bank deposits.
• Statement 3 is wrong: e₹ is simply a digital form of the rupee and loses purchasing power with inflation exactly as cash does; nothing in its design insures it against inflation. Hence 1, 2 and 4, option (d).
Why the other options are wrong
- (a) 1 and 2 only
- Statement 4 on free convertibility is also correct.
- (b) 1 and 3 only
- Statement 3 is wrong: the digital rupee is not protected from inflation.
- (c) 2 and 4 only
- Statement 1 on sovereign issuance is also correct.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2024, held on 16 June 2024. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.