Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is…

Economy ·Previously asked in Union Public Service Commission Civil Services Examination 2026

View the full solved paper: GS Paper I 2026

Question

Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is not correct?

  1. A. UPI is a real-time payment system but Digital Rupee is akin to sovereign paper currency.
  2. B. In case of UPI, settlement for end users happens instantly as the money gets immediately debited or credited but in case of Digital Rupee, there is no settlement as the wallet balance gets transferred to another wallet.
  3. C. UPI transactions are recorded by banks and reflected in bank statements but in case of Digital Rupee, no data is captured in bank statements as transactions are from one wallet to another.
  4. D. In both the cases (UPI and Digital Rupee), the liability lies with the users and their respective banks. (Correct answer)

Correct Answer

Option D — D

Detailed Solution & Explanation

The correct answer is Option D.

Key Points

  • 'In both cases, the liability lies with the users and their respective banks' is NOT correct.
  • The question asks which statement is wrong.
  • For the Digital Rupee (CBDC), the currency is a direct liability of the Reserve Bank of India — it is sovereign money, just like physical cash, not a liability of a commercial bank.
  • So saying the liability lies with 'the users and their respective banks' in both cases is incorrect, making D the answer.
  • Why the others are correct (and so not the answer):
  • (A) UPI is a real-time payment system, while the Digital Rupee is akin to sovereign paper currency — correct.
  • (B) UPI debits/credits bank accounts on settlement, while CBDC simply moves wallet balances — correct.
  • (C) UPI transactions show in bank statements; wallet-to-wallet CBDC transfers are not captured there — correct.
  • CBDC = central-bank liability (like cash); a UPI/bank deposit = commercial-bank liability.
  • That single distinction is what this question tests.

Exam Tip

  • CBDC's defining feature is that it is central-bank money in digital form — the RBI, not your bank, stands behind it.