UPSC Prelims 2024 · Question 33 of 97
UPSC Prelims 2024 question on Digital Rupee
- ExamUPSC CSE
- Year2024
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicBanking
- DifficultyHard
- TypeStatement
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?
Show answer
Answer: D. 1, 2 and 4
Verdict
Statements 1, 2 and 4 are correct → Option (d) 1, 2 and 4.
Statement by statement
Statement 1 – CORRECT: CBDC is sovereign currency issued by Central Banks in alignment with their monetary policy.
Statement 2 – CORRECT: It appears as a liability on the central bank's balance sheet.
Statement 3 – INCORRECT: CBDC like physical currency is not inherently insured against inflation. The data collected through CBDCs has the potential to be paired with strict reserve requirements for commercial banks, creating a theoretical framework for inflation control — but it is not insured against inflation by design.
Statement 4 – CORRECT: CBDC is freely convertible against commercial bank money and cash. It must be accepted as a medium of payment, legal tender, and a safe store of value by all citizens, enterprises, and government agencies. Also, holders need not have a bank account — it is fungible legal tender.