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Q55 (IAS/2026) Economy › Money, Banking & Inflation Official Key

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

Result
Your answer: —  ·  Correct: D

Explanation

Option D is the incorrect statement (and thus the correct answer).

The Unified Payments Interface (UPI) is a payment system that facilitates the transfer of money between commercial bank accounts. In the case of UPI, the money transferred is commercial bank money, and the liability lies with the respective commercial banks.

In contrast, the Central Bank Digital Currency (CBDC), or Digital Rupee, is a digital form of sovereign currency issued by the Reserve Bank of India (RBI). Just like physical fiat currency (cash), the Digital Rupee is a direct liability of the central bank (RBI), not the commercial banks or the users.

Statements A, B, and C are correct. The Digital Rupee acts as a digital bearer instrument (akin to paper currency) where wallet-to-wallet transfers represent final settlement without backend inter-bank settlement. Furthermore, individual CBDC wallet transactions are not recorded in standard bank account statements, preserving a cash-like nature.

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PROVENANCE & STUDY PATTERN

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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is not correc…
At a glance
Origin: Books + Current Affairs Fairness: High fairness Books / CA: 8.8/10 · 1.2/10
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This is a highly conceptual question testing the fundamental macroeconomic difference between a payment interface (UPI) and a sovereign digital currency (CBDC). While UPI mechanics are standard, the e-Rupee's liability and settlement nuances are straight out of recent RBI pilot documents and standard economy updates like Vivek Singh.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Is Unified Payments Interface (UPI) a real-time payment system.
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 71
Presence: 4/5
“• Unified Payments Interface (UPI)• Aadhar Enabled Payment System (AEPS)• Rupay Cards• National Automatic Clearing House (ACH)• Linking of ATMs across India (some other operators are also involved)• National Electronic Toll collection (It provides an electronic payment facility to customer to make the payments at national, state and city toll plazas by identifying the vehicle uniquely through a FASTag) NPCI is a 'Not for Profit' company where 51% stake is owned by public sector banks.”
Why this source?
  • Lists UPI as a core component under the oversight of payment and settlement systems in India.
  • Identifies UPI as a product managed by the National Payments Corporation of India (NPCI).
  • Connects UPI to the broader infrastructure of retail electronic payment services.
Rajiv Ahir. A Brief History of Modern India (2019 ed.). SPECTRUM. > Chapter 39: After Nehru... > Digital India: a Step Forward in e-Governance > p. 778
Presence: 4/5
“The government also intended to enhance and improve connectivity of all villages and rural areas through internet networks. There is no doubt that e-infrastructure, e-participation, and government e-services were put in place and made to work to improve transparency. The Unified Payments Interface (UPI), a payment system allowing mobile-enabled money transfers between bank accounts, and the Bharat Interface for Money (BHIM) for a less-cash economy were developed and put to good use, and certainly proved helpful to the citizens.”
Why this source?
  • Explicitly defines UPI as a payment system developed for a less-cash economy.
  • Describes the system's function as allowing mobile-enabled money transfers between bank accounts.
  • Notes that the interface was developed to improve transparency and e-services for citizens.
Exploring Society:India and Beyond ,Social Science-Class VII . NCERT(Revised ed 2025) > Chapter 11: From Barter to Money > New Forms of Money > p. 243
Presence: 4/5
“This is called digital money which is in electronic form. Have you observed other people around you making or receiving payments without using coins and notes? Different payment methods like debit cards, credit cards, net banking, UPI (Unified Payments Interface), etc., are also used for transactions. These mediums directly transfer money from one person's bank account into another. You will learn more about the modern methods of monetary transactions later.”
Why this source?
  • Categorizes UPI as a digital payment method used for modern monetary transactions.
  • States that the interface directly transfers money from one person's bank account into another.
  • Distinguishes UPI from physical currency, placing it in the category of electronic digital money.
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SIMILAR QUESTIONS

IAS · 2017 · Q43 Relevance score: 2.10

Which of the following is a most likely consequence of implementing the ‘Unified Payments Interface (UPI)’?

IAS · 2023 · Q72 Relevance score: 1.68

With reference to Central Bank digital currencies, consider the following statements : 1. It is possible to make payments in a digital currency without using US dollar or SWIFT system. 2. A digital currency can be distributed with a condition programmed into it such as a time-frame for spending it. Which of the statements given above is/are correct?

IAS · 2024 · Q3 Relevance score: 0.46

Consider the following statements in respect of the digital rupee : 1. It is a sovereign currency issued by the Reserve Bank of India (RBI) 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 ?

CDS-I · 2018 · Q55 Relevance score: 0.34

Which of the following statements about the India Post Payments Bank (IPPB) is/are correct? 1. It has been incorporated as a Public Limited Company. 2. It started its operation by establishing two pilot branches at Hyderabad and Varanasi. Select the correct answer using the code given below.

IAS · 2018 · Q28 Relevance score: 0.34

With reference to digital payments, consider the following statements : 1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account. 2. While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication. Which of the statements given above is/are correct ?