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?

QUESTION

Easy

Economy

Prelims 2024

Consider the following statements in respect of the digital rupee :

It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy.
It appears as a liability on the RBI's balance sheet.
It is insured against inflation by its very design.
It is freely convertible against commercial bank money and cash.

Which of the statements given above are correct?

Select an option to attempt

Explanation

Statement 1 is correct. The digital rupee, also known as the e-rupee or Central Bank Digital Currency (CBDC), is indeed a sovereign currency issued by the RBI. It's a digital representation of India's fiat currency and is part of the RBI's monetary policy toolkit.
Statement 2 is correct. Like physical currency, the digital rupee is a liability on the RBI's balance sheet. When you hold digital rupees, it's essentially a claim you have on the RBI, similar to holding physical banknotes.
Statement 3 is incorrect. The digital rupee, by itself, doesn't come with inherent inflation protection. Its value, like physical currency, is subject to inflationary pressures. The RBI manages inflation through its monetary policy measures, not through the inherent design of the digital rupee.
Statement 4 is correct. The digital rupee is designed to be freely convertible. This means you can easily exchange it with bank deposits (commercial bank money) and cash at a 1:1 ratio without any restrictions.

Therefore, the correct answer is (D) 1, 2 and 4.

Trusted by 2L aspirants