Question
UPSC Prelims 2024 Question:
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 is/are correct?
Answer (Detailed Solution Below)
Option 4: 1, 2 and 4
Detailed Solution
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
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