UPSC Prelims 2026 · Question 55 of 96
UPSC Prelims 2026 question on UPI vs Digital Rupee
- ExamUPSC CSE
- Year2026
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicMoney Market
- DifficultyMedium
- TypeDirect
Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is NOT correct?
Show answer
Answer: D. In both the cases (UPI and Digital Rupee), the liability lies with the users and their respective banks.
Analysis
Unified Payments Interface (UPI) is a digital payment platform that enables real-time interbank transactions between individuals as well as between customers and merchants. Central Bank Digital Currency (CBDC) or Digital Rupee is a digital form of legal tender issued directly by the central bank. While UPI serves as a mechanism for transferring funds already held in bank accounts, the Digital Rupee functions as currency itself and represents a direct obligation of the Reserve Bank of India (RBI).
Statement by statement
Option (a) is correct: UPI acts as a payment channel for transferring funds between bank accounts, whereas the Digital Rupee is the digital counterpart of physical sovereign currency.
Option (b) is correct: UPI transactions involve the transfer and settlement of money between bank accounts. In contrast, the Digital Rupee is transferred directly between digital wallets without requiring interbank settlement.
Option (c) is correct: Since UPI transactions are linked to bank accounts, they are reflected in account statements. Digital Rupee transactions, however, take place between digital wallets and are therefore not shown in conventional bank statements.
Option (d) is NOT correct: For UPI transactions, the liability rests with the commercial banks that maintain the deposits. However, the Digital Rupee is a direct liability of the Reserve Bank of India rather than commercial banks. Hence option (d) is the answer.