UPSC Prelims 2024 Question:

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 is/are correct?

Explanation:

The features of CBDC include:

• CBDC is sovereign currency issued by Central Banks in alignment with their monetary policy. So, statement 1 is correct. 
• It appears as a liability on the central bank’s balance sheet. So, statement 2 is correct. 
• 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. So, statement 4 is correct. 
• Fungible legal tender for which holders need not have a bank account
• Expected to lower the cost of issuance of money and transactions.
• The digital rupee itself isn't inherently inflation-proof. Inflation can still erode its value. So, statement 3 is not correct.
  
  

Therefore, option (4) is the correct answer.

Subject: Economics| Money and Banking