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UPSC Prelims 2026 · GS Paper 1 · Question 90

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

Correct answer: Option D

Economy

Options

(a) UPI is a real-time payment system but Digital Rupee is akin to sovereign paper currency.
(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.
(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.
(d) In both the cases (UPI and Digital Rupee), the liability lies with the users and their respective banks.

Detailed solution

Answer

Option (D) — Digital Rupee is a liability of the RBI.

Explanation

Unified Payments Interface (UPI) is a payment system that facilitates interbank peer to peer and person to merchant transactions.
Central Bank Digital Currency (CBDC) or Digital Rupee is a legal tender issued by a central bank in a digital form.
While UPI acts as an interface to transfer money already sitting in a bank account, the Digital Rupee is currency itself and represents a direct claim on the Reserve Bank of India.

Statement Analysis

Option A. UPI is a real time payment system but Digital Rupee is akin to sovereign paper currency: Correct. UPI is a payment interface for bank transfers, whereas the Digital Rupee is the digital equivalent of sovereign physical cash.
Option B. In case of UPI settlement happens instantly but in case of Digital Rupee there is no settlement as wallet balance gets transferred: Correct. UPI involves bank settlements where money is debited and credited. The Digital Rupee moves from wallet to wallet without requiring interbank settlement.
Option C. UPI transactions are recorded by banks but Digital Rupee transactions are not captured in bank statements: Correct. UPI transactions use bank accounts and appear on bank statements. Digital Rupee transactions happen between digital wallets and do not appear on bank statements.
Option D. In both the cases the liability lies with the users and their respective banks: Incorrect. In UPI, the liability lies with the commercial banks holding the deposits. However, the Digital Rupee is a direct liability of the Reserve Bank of India, not the commercial banks.