UPSC Prelims 2026 Question:

Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital  Currency (Digital Rupee) is not correct?

Answer: 4

Explanation:

Unified Payments Interface (UPI) is an instant real-time payment system developed by the National Payments Corporation of India that enables inter-bank peer-to-peer and merchant transactions.

• In UPI, money is transferred directly between bank accounts, and the liability ultimately lies with the commercial banks maintaining those accounts. Transactions are recorded in bank statements and reflected in banking records. 
• The Digital Rupee (e₹) is a Central Bank Digital Currency (CBDC) issued directly by the Reserve Bank of India. It is a sovereign digital form of currency, similar to paper notes and coins. In this case, the liability does not lie with commercial banks; instead, it is a direct liability of the central bank, i.e., the RBI.
• UPI is a payment system, whereas the Digital Rupee is a sovereign currency in digital form.
• UPI requires inter-bank settlement, while Digital Rupee transactions involve the transfer of wallet balances without conventional bank settlement. 

• UPI transactions are reflected in bank accounts and statements, whereas Digital Rupee wallet-to-wallet transfers may not appear in regular bank statements. 
• Liability in UPI lies with commercial banks, whereas in Digital Rupee it lies with the RBI, not with users’ banks. 

Therefore, option (4) is the correct answer.