GS Paper III — Q1
What do you mean by Digital Rupee? In this context, explain the working and progress of India's Central Bank Digital Currency…
What do you mean by Digital Rupee? In this context, explain the working and progress of India's Central Bank Digital Currency (CBDC). (Answer in 150 words) 10 marks
हिंदी में प्रश्न पढ़ें
डिजिटल रुपये से आप क्या समझते हैं? इस सन्दर्भ में, भारत के केन्द्रीय बैंक डिजिटल मुद्रा (सी बी डी सी) की कार्यप्रणाली तथा प्रगति का वर्णन कीजिए। (उत्तर 150 शब्दों में दीजिए)
Model answer
Written by UPSC Answer Check against this question's marking rubric, to the 150-word length. UPSC does not publish answers for Mains — this is one way to score well, not an official key.
Digital Rupee (e₹) is RBI’s token-based, tokenised central bank liability, a legal tender distinct from private cryptocurrencies; the pilot uses DLT, though the architecture is not fixed to blockchain. It has two forms: e₹-Wholesale, launched in November 2022 for settlement of secondary-market transactions in government securities, and e₹-Retail, piloted from December 2022 for public use. e₹ is distributed through a two-tier model, with commercial banks such as SBI, ICICI, HDFC and Yes Bank issuing wallets to customers; offline transactions have been piloted. To widen merchant acceptance, UPI interoperability has been enabled for e₹-R wallets. Pilot progress so far shows a growing user and merchant base in selected cities, while India is exploring cross-border CBDC settlement, with mBridge serving as a reference rather than an Indian linkage. e₹ can reduce currency management costs, speed settlement and deepen financial inclusion, but low retail adoption, privacy concerns and bank disintermediation still remain challenges.
What "What" is asking you to do
What is an interrogative rather than a command word. It opens a multi-part stem — what the thing is, then its causes, risks or remedies — and the definitional clause is the gate rather than the answer, with the marks spread across the clauses that follow it.
Structure that answers it
What it is, in two or three lines → the second clause of the stem, at length → the third clause, at length → a closing line only if room remains
Where marks are lost
Spending half the answer establishing the object and leaving the later clauses, which carry most of the marks, thinly answered.
How this answer will be evaluated
Approach
Framework: GS3 Economy/Technology: Definition > Working > Progress. explain: definition/context > points in order > small example > short close Full marks: Clear definition, detailed working mechanism, specific progress updates, and balanced view.
Key points expected
- Define Digital Rupee as a digital form of currency
- Explain the working mechanism of CBDC
- Describe the progress of India's CBDC
- Mention the role of the Central Bank
Evaluation rubric
Each sub-part is marked on its own, against the marks and word limit printed on the paper.
- The answer Define Digital Rupee and explain the working and progress of India's CBDC. 10 marks · 150 words
explain— definition/context → points in order → small example → short close
Must cover
- Define Digital Rupee as a digital form of currency
- Explain the working mechanism of CBDC
- Describe the progress of India's CBDC
- Mention the role of the Central Bank
Loses marks
- Confusing CBDC with UPI or e-wallets
- Vague description of 'progress' without specifics
- Ignoring the 'working' aspect of the question
Earns more
- Distinguish between retail and wholesale CBDC
- Mention specific pilot projects or trials
- Explain the benefits of CBDC
- Discuss the challenges or risks
Extra mark
- Mention a specific date or phase of the pilot
- Reference a specific RBI circular or policy
Practice this exact question
Write your answer and it is marked point by point against the model answer above — what you covered, what you missed, what you got wrong.
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