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?
- A.1 and 2 only
- B.1 and 3 only
- C.2 and 4 only
- D.1, 2 and 4
Correct answer
Explanation
The correct answer is D, 1, 2 and 4. The digital rupee is RBI-issued sovereign money, sits as a liability of the RBI like notes do, and can be exchanged one-to-one for cash and bank deposits.
The digital rupee, or e₹, is India's central bank digital currency (CBDC). The RBI began pilots in 2022, a wholesale version (e₹-W) in November and a retail version (e₹-R) in December. It is the same rupee in electronic form: legal tender, issued in line with monetary policy, and counted among the RBI's liabilities in the same way as currency in circulation. Users hold it in a digital wallet offered by participating banks and can swap it at par with bank balances or notes.
Statement 3 is wrong: like paper currency, the digital rupee carries no built-in protection against inflation; its purchasing power falls when prices rise.
So A is wrong because it leaves out statement 4, B is wrong because it includes the false statement 3, and C is wrong because it leaves out statement 1.
Exam tip: e₹ = CBDC, legal tender, RBI liability, 1:1 with cash; wholesale pilot November 2022, retail December 2022.
Practice Questions
View allWhat is/are the purpose/purposes of the 'Marginal Cost of Funds based Lending Rate (MCLR)' announced by RBI?
1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances.
2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.
Select the correct answer using the code given below.
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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The RBI brought in MCLR to make banks' loan pricing more transparent and to give borrowers rates that are fair to both sides.
Read the full explanation →Consider the following statements:
Statement-I: Syndicated lending spreads the risk of borrower default across multiple lenders.
Statement-II: The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line.
Which one of the following is correct in respect of the above statements?
- A.Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
- B.Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
- C.Statement-I is correct, but Statement-II is incorrect
- D.Statement-I is incorrect, but Statement-II is correct
Show answer
A syndicate shares the default risk, and a syndicated facility can be either a term loan or a credit line.
Read the full explanation →With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements : 1. There is no minimum capital requirement for wholly owned banking subsidiaries in India. 2. For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals. Which of the statements given above is/are correct ?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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RBI does set a minimum capital for a foreign bank's wholly owned subsidiary, and it requires at least half the board to be Indian nationals.
Read the full explanation →With reference to digital payments, consider the following statements : 1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account. 2. While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication. Which of the statements given above is/are correct ?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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BHIM can send money to anyone who has a UPI-linked bank account, but a chip-and-PIN debit card does not use four factors of authentication.
Read the full explanation →The term 'Core Banking Solutions' is sometimes seen in the news. Which of the following statements best describes/describe this term?
1. It is a networking of a bank's branches which enables customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts.
2. It is an effort to increase RBI's control over commercial banks through computerization.
3. It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank.
Select the correct answer using the code given below.
- A.1 only
- B.2 and 3 only
- C.1 and 3 only
- D.1, 2 and 3
Show answer
Core Banking Solutions (CBS) links all branches of a bank to one central system, so a customer can bank at any branch, not just the home branch.
Read the full explanation →