2026 · GS Paper 3 · Q1 · 10 marks
What do you mean by Digital Rupee? In this context, explain the working and progress of India's Central Bank Digital Currency (CBDC). (Answer in 150 words)
In short
The Digital Rupee is India's Central Bank Digital Currency, legal tender issued by the RBI in digital form and distributed through banks in a two-tier model. Its wholesale and retail pilots began in November and December 2022 and have since added UPI QR interoperability, offline and programmable payments.
Model answer
Ghissu Editorial · Verified 4 Oct 2026 · 178 words
The Digital Rupee (e₹) is India's Central Bank Digital Currency: legal tender issued by the RBI in digital form, a direct liability of the central bank like cash, made possible by the Finance Act 2022 amending the RBI Act, 1934.
Working of the e₹
Two-tier e₹ model → RBI issues e₹ → Banks distribute → User wallet → Person or merchant
1. Two Variants: The wholesale e₹-W settles interbank trades, while the retail e₹-R is a non-interest-bearing token held in bank-issued wallets. 2. Payment Features: Users pay person-to-person or to merchants by scanning QR codes, now interoperable with UPI.
Pilots
RBI launched the wholesale pilot on 1 November 2022 and the retail pilot on 1 December 2022, after its October 2022 Concept Note.
New Features
Pilots have since added offline payments, programmable uses such as targeted benefits, and non-bank wallets, though value in circulation remains small beside cash and UPI.
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Question from the official UPSC Civil Services (Main) Examination 2026 paper. Answer written by Ghissu's engine and checked against our editorial standards. Found an error? Tell us and we correct it within 48 hours.