Consider the following statements in respect of the digital rupee :

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

The correct option is 1, 2 and 4.

Let us analyze each statement step-by-step to understand why this option is correct:

Statement 1 is correct: The Digital Rupee (e₹) or Central Bank Digital Currency (CBDC) is a digital form of fiat currency issued by the Reserve Bank of India (RBI). It is a sovereign currency that is issued in alignment with the RBI's monetary policy, serving as a digital alternative to physical cash.

Statement 2 is correct: Just like physical currency notes, the digital rupee is a direct claim on the central bank. Therefore, it is recorded as a liability on the Reserve Bank of India's balance sheet.

Statement 3 is incorrect: The digital rupee is not insured against inflation. It is a digital representation of fiat money, and its purchasing power fluctuates with inflation just like physical currency. There is no built-in design mechanism that protects it from losing value due to inflation.

Statement 4 is correct: The digital rupee is legal tender and is freely convertible at par (1:1) against commercial bank money (deposits in bank accounts) and physical cash.

Thus, statements 1, 2, and 4 are correct, making 1, 2 and 4 the correct answer choice.