Consider the following statements in respect of the digital rupee:

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

Statement 1 is Correct: The Digital Rupee is a sovereign currency issued by the RBI. It has the same legal tender status as physical cash and is managed in accordance with the RBI's monetary policy objectives.

Statement 2 is Correct: Just like physical currency (banknotes and coins), the Digital Rupee is a direct claim on the central bank. Therefore, it appears as a liability on the RBI’s balance sheet, unlike "commercial bank money" which is a liability of private or public sector banks.

Statement 3 is Incorrect: The Digital Rupee is not insured against inflation. It is a digital form of the national currency; its purchasing power fluctuates just like physical cash. If the inflation rate is 5%, the real value of 100 Digital Rupees will decrease by 5%, exactly like a ₹100 note

.Statement 4 is Correct: It is designed to be freely convertible. Users can convert their physical cash or commercial bank deposits (money in their savings accounts) into Digital Rupees at a 1:1 ratio and vice-versa.Key Features of Digital Rupee ($e₹$)Non-Interest Bearing: To prevent a flight of deposits from commercial banks, the RBI does not currently pay interest on the Digital Rupee.

Anonymity: It aims to provide a degree of anonymity for small-value transactions, similar to physical cash, unlike traditional digital banking transfers (UPI/IMPS) which leave a permanent bank statement trail.Finality of Settlement: Since it is a liability of the RBI, the settlement is instantaneous and final, reducing the "interbank settlement risk" inherent in commercial bank transfers.Summary TableFeaturePhysical CashDigital Rupee (e₹)UPI / Bank TransferIssuerRBIRBICommercial BankLiability ofCentral BankCentral BankCommercial BankConvertibilityYes (1:1)Yes (1:1)Yes (1:1)Interest PaidNoNoYes (usually)