Consider the following statements in respect of the digital rupee

Consider the following statements in respect of the digital rupee: ( UPSC CSE 2024)

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?

(a) 1 and 2 only

(b) 1 and 3 only

(c) 2 and 4 only

(d) 1,2 and 4

Answer: D

Explanation

Reserve Bank of India defines  Central Bank Digital Currency (CBDC) as the legal tender issued by a central bank in a digital form. It is the same as a sovereign currency and is exchangeable one-to-one at par (1:1) with the fiat currency. While money in digital form is predominant in India—for example in bank accounts recorded as book entries on commercial bank ledgers—a CBDC would differ from existing digital money available to the public because a CBDC would be a liability of the Reserve Bank, and not of a commercial bank. 

•  Statement 1 is correct: The Digital Rupee (CBDC) has been introduced through an amendment to the RBI Act, 1934 based upon the recommendations of the Subhash Chandra Garg Committee. 
• Statement 2 is correct: Just like Bank note, the CBDC is a liability of the RBI.  
• Statement 3 is incorrect: The CBDC is not insured against Inflation. 

Statement 4 is correct: The CBDC is fungible i.e., it can be converted into Deposits and Cash.

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