Which one of the following statements about Unified Payments Interface (UPI) and Central- Bank Digital Currency (Digital Rupee) is not correct?
- UPI is a real-time payment system but Digital Rupee is akin to sovereign paper currency.
- 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.
- 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.
- In both the cases (UPI and Digital Rupee), the liability lies with the users and their respective banks.
Explanation
Statement (d) is incorrect
- The fundamental difference between UPI and the Digital Rupee lies in who holds the liability. Money transferred via UPI is “commercial bank money” (your bank deposits), meaning it is a liability of your respective commercial bank. The Digital Rupee (CBDC), however, is a direct liability of the Reserve Bank of India (RBI). It is a sovereign fiat currency, just like physical cash. Even though commercial banks distribute the Digital Rupee wallets, the digital currency inside them is backed directly by the central bank.
Statement (a) is correct
- Unified Payments Interface (UPI) is a real-time payment system that transfers money instantly between bank accounts, whereas the Digital Rupee or Central Bank Digital Currency (CBDC) is a sovereign digital form of currency issued by the Reserve Bank of India, similar in nature to paper currency.
Statement (b) is correct
- In a UPI transaction, while the user sees an instant debit/credit, actual settlement between the banks happens in batches on the back end. With the Digital Rupee, the transfer of the token from one wallet to another is the final settlement itself, exactly like handing a physical ₹500 note to someone.
Statement (c) is correct
- Since UPI moves bank deposits, every transaction is routed through the bank’s core banking system and appears on your statement. The Digital Rupee moves wallet-to-wallet directly. To mimic the privacy of physical cash, these transactions do not appear on your standard bank account statement.
