Economy ยท GS3
CBDC-based direct benefit transfer pilot
One line
The government announced a central bank digital currency based DBT launch in Chandigarh and Dadra and Nagar Haveli.
Summary
A retail CBDC is a direct liability of the central bank in digital form. Using it for benefits can test programmability, settlement, access, and user experience, while raising questions about privacy and offline usability.
PYQ pattern
UPSC can compare CBDC, cash, bank deposits, UPI, and crypto-assets, then examine inclusion and privacy.
Core notes
- India's CBDC is the digital rupee issued by the Reserve Bank of India.
- It differs from bank deposits and private crypto-assets.
- DBT transfers benefits directly to identified recipients through digital rails.
- Pilots should assess inclusion, device access, grievance redress, and data minimisation.
Prelims lens
- A CBDC is sovereign money and a central-bank liability.
- UPI transfers commercial-bank deposit money; it is not itself a currency.
- Programmability can restrict use according to defined conditions.
MCQ 1
A retail CBDC is a liability of:
- A. The central bank
- B. A social-media company
- C. A merchant association
- D. A crypto exchange
Reveal answerHide answer
A
Sovereign digital currency is issued by the central bank.
MCQ 2
UPI is best described as:
- A. A payment interface for transferring bank money
- B. A privately mined currency
- C. A government bond
- D. A physical banknote
Reveal answerHide answer
A
UPI enables instant transfers between bank accounts and is not itself money.
Mains
Question, 10 marks, 150 words: Evaluate the potential and safeguards of using a retail CBDC for welfare transfers.
Approach:
- Distinguish CBDC from bank deposits and UPI.
- Discuss settlement, targeting, and offline access.
- Identify privacy and exclusion risks.
- Recommend pilots, choice, and grievance mechanisms.