Consider the following statements in respect of the digital rupee :

Correct Option (D)

Explanation

Statement 1: The digital rupee, or Central Bank Digital Currency (CBDC), is a sovereign digital currency issued by the Reserve Bank of India (RBI). It is aligned with the RBI's monetary policy and possesses the same legal tender status as physical fiat currency. This statement is correct.

Statement 2: Similar to physical banknotes, the digital rupee is recorded as a liability on the RBI's balance sheet. This reflects the central bank's obligation to the holder, distinguishing it from deposits held in commercial banks, which are liabilities of those respective banks. This statement is correct.

Statement 4: The digital rupee is fully and freely convertible at par with commercial bank money (bank deposits) and physical cash. This means one digital rupee holds the same value as one physical rupee or one rupee in a bank account, ensuring seamless interoperability within the existing monetary system. This statement is correct.

Incorrect Options

Statement 3: The digital rupee is not inherently protected or insured against inflation by its design. Like other forms of fiat currency, its purchasing power can be affected by inflationary pressures. Inflation management is a function of the central bank's monetary policy tools, not an intrinsic feature of the currency's digital format. Therefore, this statement is incorrect.

Option 1 is incorrect because it omits statement 4, which is correct.

Option 2 is incorrect because it includes statement 3, which is incorrect.

Option 3 is incorrect because it omits statement 1, which is correct, and includes statement 3, which is incorrect.