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?
Answer & explanation
Answer: (d) 1, 2 and 4
Statements 1, 2 and 4 are features RBI lists for the digital rupee: a sovereign currency issued in line with monetary policy, a liability on the central bank's balance sheet, and freely convertible against commercial bank money and cash. Statement 3 is not: nothing in RBI's design promises protection against inflation, and e₹ is a digital ₹ note that pays no interest.
- ✓ 1. RBI's concept note describes a central bank digital currency as sovereign currency issued by the central bank in alignment with its monetary policy.
- ✓ 2. Like a paper note, it is a direct liability of the central bank and appears on its balance sheet, not on a commercial bank's.
- ✗ 3. RBI calls it a safe store of value, but that is not a promise against rising prices. The design carries no such cover, and no interest is paid on e₹ wallet balances, exactly as with cash.
- ✓ 4. The concept note lists free convertibility against commercial bank money and cash among its features.
Remember · Digital rupee: sovereign currency issued by RBI in line with monetary policy, an RBI liability, freely convertible with bank money and cash. No interest, no inflation cover.
Sources
- RBI, Concept Note on Central Bank Digital Currency (October 2022), features of CBDC ↗ “CBDC is sovereign currency issued by Central Banks in alignment with their monetary policy • It appears as a liability on the central bank’s balance sheet … Must be accepted as a medium of payment, legal tender, and a safe store of value by all citizens, enterprises, and government agencies. • Freely convertible against commercial bank money and cash”
- RBI, Digital Rupee (e₹) FAQs ↗ “Given the cash-like features of e₹, there is no interest payable on the wallet balances.”
Question and answer: UPSC's official GS Paper I (2024, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·