Consider the following statements in respect of the digital rupee:

1. It is a sovereign currency issued by the Reserve Bank of India (RBI) 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?

Statement 2 is Correct: Unlike "commercial bank money" (which is a liability of your private bank), the Digital Rupee is a direct liability of the Central Bank. On the RBI’s balance sheet, it is recorded under the same category as "Currency in Circulation. 

"Statement 3 is Incorrect: This is a common misconception. While the Digital Rupee is "safe" from a credit risk perspective, it is not insured against inflation. Like physical cash, its purchasing power can still decrease if inflation rises. It is a medium of exchange, not a guaranteed hedge against inflation like some indexed bonds or physical gold.

 Statement 4 is Correct: The e-Rupee is designed to be interoperable. You can convert your digital rupees into physical cash or transfer them into your commercial bank account (and vice versa) at a 1:1 parity without any loss in value .Understanding the CBDC Ecosystem The Digital Rupee essentially bridges the gap between the "safety" of physical cash and the "convenience" of digital payments. Here is how it compares to the money you currently use:FeaturePhysical CashCommercial Bank Money (UPI/NEFT)Digital Rupee (CBDC)IssuerRBICommercial BanksRBIFormPhysicalDigital EntryDigital TokenLiability ofRBIThe BankRBIAnonymityHighLowManaged Anonymity