How we will cover economics for prelims

•Money : barter to bitcoin

•money: Monetary policy, Repo, CRR,

SLR,

•Classification of Financial
intermediaries : Banks & Non – banks

Money Banking & •Bad loans & NPA

Finance •Sebi & share markets

•Financial Inclusion

•Budget & Taxation : disinvestment,

subsidies, Deficit & public Finance
Budget, FC, GST & •Budget & Taxation : Indirect Taxes &
FRBM Act GST

•Finance Commission, black money &

Revenue expenditure
economy
pillars
International trade, •Balance of payment, international
trade & currency exchange
BoP
•International Organization &
Agreement related to Economy

•Agriculture, Green revolution

Sectors, GDP, •startups, make In India, MSME, EoD

Inflation, Micro •Economic planning, NITI Aayog,

economics Planning Commission,unemployment

•Macro : GDP, GNP, NNP, Inflation,

CPI, WPI etcc
I) MONEY, BANKING & FINANCE
SuB SYLLABuS
1. BArtEr SYStEM & It’S dISAdvANtAGES
2. MONEY : FuNCtIONS
3. MONEY : EvOLutION & tYpES
4. dEMONEtISAtION OF FIAt MONEY
5. BANK MONEY/dEpOSIt MONEY
6. ELECtrONIC/dIGItAL pAYMENt
7. NAtIONAL pAYMENt COrpOrAtION OF INdIA
8. CrEdIt & dEBIt CArd
9. MErChANt dISCOuNt rAtE
10. GLOBAL MONEY trANSFEr
11. dIGItAL pAYMENt rEGuLAtOrY BOdIES
12. CrYptO CurrENCY & BLOCKChAIN tEChNOLOGY
13. CENtrAL BANK dIGItAL CurrENCY
14. NON FuNGIBLE tOKEN
15. prEvIOuS YEAr quEStIONS OF upSC & KpSC
= vErY vErY IMpOrtANt

= IMpOrtANt

= NO COSt BENEFIt
 1. BArtEr SYStEM & It’S dISAdvANtAGES

Barter system : People used to trade with each other even before money was
invented, exchange of commodity with another.
Prons (+ve) :
Simplest form of trade
foreign exchange, no need to worry about ₹-$ exchange
No danger of fake money

Cons (-ve) :
Double co-incidence of wants
Search cost & Transaction cost is high
Storage of perishable commodities is difficult, loss of value
Doesn’t encourage specialization and division of labour
Fungiblity problems, i.e
Fungible items : Division & mutual Substitution Possible. Currency & gold
Non Fungible items :eg, Diamonds, shares, bonds of different companies

Limitation of the Barter System → Money was invented.

 2. FuNCtIONS OF MONEY :

Primary function Secondary function Contingent function

1)Measure of value : 1)Store of value : White 1)Basis of credit system,
gm=wt, ml=vol, ₹=value money/salary in bank - financial markets (share,
linked with ATM. bonds etc..)
Bank (holding cash)
2)Medium of Exchange : 2)Transfer of value : Soldier 2)Employing factor of
Buy & sell goods and in Kashmir transferring production. That is the
services using money as money to parents in Kerala land, labour and capital
the medium.
3)Std of Deferred payment 3)Creation and
Iphone price = 70,000 redistribution of National
Monthly EMI = 3500 Income via taxation.
2 years = 3500×24 = 84,000
(Time value of money
/interest)

3. MONEY : EvOLutION & tYpES :

3.1) Commodity money / (Intrinsic value : yes)

→Iron Nails, Bear pelts, Cocoa Beans, Whale Teeth, Gold Nuggets
→Problems? Perishable, not uniform, not pure, foreigners may not accept
3.2) Metallic money : (intrinsic Value : yes)
→Traders & Kings stamped their marks on gold nuggets for uniformity &
trust.
→Indo Greek kings & Kushana kings issued gold coins, but Gupta Gold
coins most spectacular- King is playing Veena, shooting animals,
standing with wife
→Delhi Sultanate Kings: Silver Tanka. Sher Shah Suri Rupiyah silver coin.
Akbar: Muhr
3.3) Metallic Money →Full bodied vs Token Coins

Gupta coin 8gm gold 50 paisa modern 4gm steel

Full bodied coin Token coins

Intrinsic value is Equal to or Intrinsic Value is less
more than it’s Face Value
Challenge? 1330’s Tuqlaq's Token coin
→Debasement : decreasing the experiment = failed. Why?
amount of metal in coin, usually Watch lecture video class
happens when king's rule get →Modern Indian coins are
weak/poor Token Coins. Cupronickel metal
used to discourage melting
→Coinage Act 2011 prohibits
melting of Coins

What is Intrinsic Value of a coin?

Precious metal has INTRINSIC VALUE, you can use metallic money as
money or you can melt the metal for making jewellery or weapons.

In paper currency Intrinsic value is Zero or no. Why? Watch the lecture
3.4) Paper Currency : (intrinsic value = no)

What is Fiat money? It MUST fulfil two conditions

SIMULTANEOUSLY
1) It MUST BE in the form of Physical Currency Coin /
Physical Currency Notes / VirtualCoin/ DigitalCoin/
CryptoCoin which can measure value
2) It MUST BE issued by the order of a King / Queen /
Government / Central Bank.

3.5) Legal tender : To become a ‘legal tender’, a given

coin/currency MUST fulfil two conditions SIMULTANEOUSLY:
1) It must be a FIAT MONEY
2) It must be legally valid for all debts & transactions throughout
the country. Other party can’t Refuse to accept
 Bitcoin is not a Fiat money, yet it is legal tender in El-Salvador
nation. But it is an exception.

Commemorative Coins = Fiat money yes but not legal tender

unless notified by RBI/Government to be used as legal tenders.

3.6) Legal tender : Limited & Unlimited

 3.7) I promise to pay the bearer..? What’s the meaning?
Currency note is zero interest, anonymous bearer bond /
promissory note

4) dEMONEtIzAtION OF FIAt MONEY (prEvIOuSLY 1946 , 1978).

Definition : Demonetization is the Wholesale withdrawal of
currency notes from circulation or removal of Legal status of
Currency notes.
8/Nov/2016: Finance Ministry → Dept of Economic Affairs →
notification to ban the “Specified Bank Notes” (SBN) of
Mahatma Gandhi series ₹ 500 and 1000.
Specified Bank Notes (Cessation of Liabilities) Act 2017=
RBI not required to honor “I promise To pay…”.
Banned notes (500,1000) can’t be kept except for research
or numismatics-hobby or museum- And that too in limited
amount!
3.8.1) ₹2000 Withdrawn but continued as Legal Tender.
→2016-Nov: RBI introduced ₹2000 note, to meet the currency
requirement of the economy in an faster Manner after
demonetisation of ₹500 and ₹1000
→2018-2019 Printing of 2000₹ stopped
→2023 May 23rd RBI asked the people to either any of the
following things by two things.
Deposit this note in your bank account. No limit
Exchange ₹2000 note with other notes. 20,000 per visit
As of January 2024: over 97% of ₹2000 notes returned. Only
₹9330 cr worth notes not yet returned.

3 9) Redenomination: Drop zeros, Change name, issue new

→Redenomination involves removing zeros from Currency to
facilitate transactions during high inflation.
Inflation : is the rise in the general level of prices of goods
and services in an economy over a periods of time.
→Here the currency is not instantly declared illegal /
withdrawn from Circulation Immediately. Old currency is
allowed to continue side by side with new currency.
→But people are given option to Switch to the new currency.
Thus it is different from demonetization.
Redenomination doesn’t fix Inflation problem in reality
because it doesn’t increase the supply of goods and
Purchasing power of a Customer
5) BANK MONEY / dEpOSIt MONEY :

BANK MONEY

FIAt MONEY ChEquE

CArdS
DEPOSIT ELECtrONIC OrdErS
BANK ACCOuNt (NGFt, rtGS)

5.1) Paper orders : cheque & Demand Draft :

→Demand Draft : used to transfer money from one bank
account to another. It is a secure and reliable way to pay, and is
often used for large transactions and fund transfers.

→Over draft : when person has insufficient Bank Balance, still

he may withdraw money from his account as a loan. However
it’s not a loan & it is mainly for short term operating expenses,
Loans is mainly for longer term higher value expenses.
5.2) NPCI cheque Truncation System & Positive pay
mechanism : MANuAL (MAY
tAKE MOrE
tIME)
ChEquE CLEArANCE

AutOMAtEd
CLEArING SYStEM

MICR (magnetic ink Character

recognition) 1986 OCR (optical CTS (cheque
character Truncation System)
(Iron oxide ink)
Recognition 2010

Cheque Trunication System : Scanned Image of cheque

electronically sent to the drawee branch for faster clearance
without theft or tempering. MCR, OCR, Barcode Reader not
required.
Positive Pay Mechanism : If recipient manipulated the
cheque numbers e.g. using magic- Marker/eraser to write
25,00,000 in place of 250,000 YET Sender will be protected
because both images will not match then cheque will be
rejected by his bank.

→Cheque can be dishonoured, due to Insufficient A/C Balance

but Demand Draft Can’t be dishonoured. Sender has to pay the
amount to bank then Bank issues DD.
6) ELECtrONIC/dIGItAL pAYMENt
→Payment and settlement act 2007, empowers to regulate
such products and services.

online money transfer, card payments etc..

6.1) Core Banking Solution : It’s a networking of a bank

branches which enables customers to operate their accounts
Regardless of where they open the account.
→E-Kuber platform of RBI is an example and kuber platform is
used for Repo, OMO, Sovereign Gold Bonds etc…
6.2 ) RTGS vs NEFT vs IMPS :

→NEFT : A settlement system where A large no: of transactions are

accumulated & offset against each other, with only the net difference
being transferred at the end of the given settlement cycle. It may reflect
in customers bank website screen immediately but actual
Administrative transfer of money is done in 30-30 minute interval.
→RTGS : Instantly Settled Individually, 30 minutes interval not needed.
It’s for high value / large scale transactions / corporate settlement
→IMPS: 24*7 and it’s instantly settled, just like RTGS. Can be used
from mobile phone app and banks web portal. Targeted NEFT, for Retail
segment / merchant transactions.
7) NAtIONAL pAYMENt COrpOrAtION OF INdIA :

The NPCI was established in 2008 by the Reserve Bank of

India (RBI) and the Indian Banks’ Association (IBA) to manage
India’s retail payment and settlement systems. The NPCI’s goal
is to provide infrastructure for India’s banking system to
support electronic and physical payment and settlement
systems.

NPCI is registered under Company Act as a “Not for Profit

Company under the provisions of Section 25 of Companies Act
1956 (now Section 8 of Companies Act 2013).
The Payment and Settlement Systems Act, 2007 gave the
RBI and IBA the power to create a secure electronic payment
and settlement system in India.
Its UPI-BHIM app & other mechanisms also help in financial
inclusion of villagers & poors by expanding the reach of banking
network.
7.1) NPCI→ UPI (UNIFIED PAYMENT INTERFACE) : It is a
technology for building digital payment apps based on IMPS
with following features :
→QR Scan & Pay to merchants.
→You can link bank account for direct transfer of money without
storing money in ‘wallet’ first.(unlike AmazonPay / Mobikwick etc)
→Such app can have Push transaction (e.g. Remittance to family), Pull
Transaction (e.g. monthly Bill deduction by Electricity Co.) or even Bill
sharing among friends
→Examples of UPI based app: SBI’s SBIBuddy/Yono, Axis Bank’s
AxisPay and NPCI’s BHIM.

NPCI has been signing agreements with organisations in Bhutan,

Nepal, Singapore, Europe, Mauritius, Srilanka etc. so that directly
Indian tourists in those foreign countries can directly spend the money
from their Indian bank account by using UPI-Based Apps

→The main difference between a push and pull transaction is who

initiates the payment.
7.2.1) NPCI → UPI → 123PAY for Feature Phones : If user
doesn’t have a smartphone. If he has a Basic phone / Feature
phone with number pads, still he can use UPI using USSD
(Unstructured Supplementary Service Data) code (99#).
→However this feature was very cumbersome. It was not very
popular among the people.
→So, 2022-March: RBI launched a new UPI platform named
123PAY (with help of NPCI) to give more UPI-payment options
for Feature phones/Basic phones.
→Digital payment- esp. among the poor people who do not
have smart phones but have feature phones.
→According to the Economic Survey the total number of digital
transactions steadily increased in the last three years and the
% share of UPI in the total digital transactions also steadily
increased in the last three years.
7.2.2) UPI: Pre-sanctioned credit line/Overdraft in UPI (2023)

PRE-SANCTIONED CREDIT LINE?

When a banker allows an account holder to borrow up to a

predetermined amount of money, without having to apply for a loan, it
is called Pre-Sanctioned Credit Line.

RBI allowed Pre-Sanctioned Credit Line/overdraft facility extended

to UPI. So, even if a person does not have balance in his bank account,
still he can PAY using UPI while shopping. (and then later, when he gets
the salary/pension/income deposited in his bank account, then the
banker will recover the principal and interest.)
7.2.3) NPCI → UPI BHIM (Bharat Interface for Money) (2016):
→Money transfer app designed by NPCi. It works on Android,
iOS/Apple mobiles as an APP. Works even on non-smart (-basic
feature) phones using *99# USSD- Unstructured
Supplementary Service Data.
→Bank to bank/peer to peer transaction using mobile phone
(xyz@upi). No need to install multiple apps for each bank
account (SBIBuddy, AxisPay etc) just one BHIM app to use all
such bank accounts.
→The Bharat Interface for Money (BHIM) app uses three-factor
authentication (3FA): Device ID and mobile number, Bank
account, and UPI PIN.
→Your money stays in bank account and earns interest. It’s not
stored in ‘wallet outside your bank account as it happens in
Mobikwick, Phonepe etc. (PS: in later stage, PhonePe etc
private apps also included UPI type mechanism so storing
money in ‘wallet’ became optional.
7.2.4) NPCI → RUPAY CARD PAYMENT GATEWAY (2012) :
Rupee Payment = RuPay card is world’s 7th payment gateway
similar to Mastercard, Visacard, China’s Union Pay. Rupay
charges less fees than other companies.
→Works in 3 channels: 1) ATM, 2) Point of Sale Device
(PoS/card reader machine), 3) Online portals.
→Rupay debit card given free with PMJDY (Jan Dhan) Bank
account. Rupay has signed collaboration agreements with
some digital payments companies in Singapore, Japan etc. So,
it may be used in those countries. But presently Rupay is not
having the widest reach across all the countries unlike
MasterCard and Visa.
7.2.5) NACH-ABPS: Hybrid / Mixed mode in MGNREGA : Both
these technologies developed by NPCI

NACH : National Automated Clearing House (NACH) is a

web-based system that can be used for bulk payments of utility
bills, dividends, salaries, pension, and insurance premiums.

AEPS: Aadhar Enabled Payment Useful for Direct Benefit

Transfer (DBT) into Beneficiary’s account for MNREGA wages,
LPG subsidy, scholarship etc.

ABPS : Aadhaar-based Payment System.Sends government

benefits directly to your bank account linked with Aadhaar.
Difference between AEPS & ABPS ? : APBS: Sends government
benefits directly to your bank account linked with Aadhaar. AEPS:
Allows you to do basic banking transactions like withdrawals and
balance checks using Aadhaar at a local shop or business.

Presently both NACH and ABPS methods used for giving salaries to
MGNREGA workers. Thus, it’s called Mixed payment mode/hybrid
mode for MGNREGA wages.

Government wants to shift completely to ABPS method. But due to

operational and technical issues, deadline keeps getting delayed.
Some poor people (without Aadhar card) given exemption from ABPS.
7.2.6) New Umbrella Entity (NUE) for Retail Payments System (2019)
Paytm has rival companies like Mobikwick, Phonepe; Mastercard vs
Visa; SBI vs Axis Bank, But there is no rival company against NPCI.

NPCI is an umbrella entity for retail payments system – it operates

in card payment (RuPay), Money transfer (IMPS), Mobile Apps (UPI,
BHIM), ATM Network (NFS) etc.

2020: RBI issued a proposal, “if any Indian company interested to

compete in this (NPCi-like) retail payment segment, we’ll license them
as new umbrella entity (NUE) Subject to these technical “XYZ”
technical eligibility requirements

Benefits? More companies like NPC → more competition more

innovation and cheaper services for users.
8. CrEdIt & dEBIt CArdS (ALSO CALLEd
‘pLAStIC MONEY :

3) Hybrid Card / Duo Card: Single card with two chips for 1) credit card
and 2) debit card. So, You don’t have to carry two separate cards. E.g.
Indusbank Hybrid card
4) Pre-paid card: It’s a subtype of debit card. Debit card is linked to a
given bank account. But Pre-paid card can be bought even without
having account in the given bank e.g. IRCTC’s UBI Prepaid Card which
can be used for buying rail tickets, meals etc. support provided by
Union Bank of India (UBI) and NPCi’s Rupay gateway.
8.1) Card Tokenization (from 1/Oct/2022) : Tokenisation =
creates a set of numbers called ‘token’ to replace/hide the
sensitive card data such as the 16-digit account number, expiry
date and security code.
→This ensures your card information is not disclosed to
merchant website protection from hacking.
→Card owner can generate Tokenization through visiting card-
issuer’s/banker’s website/App through laptops, desktops,
tablet, wearables (smartwatch) etc.
8.2) CARD/TECH FOR TRANSPORT/TRAVEL
I) National Common Mobility Card (NCMC, 2019) : One
Nation One Card Model’ by Ministry of Housing & Urban Affairs
(MoHUA) with the help of NPCi, Bharat Electronics Limited
(BEL Company), and some banks. It helps developing special
cards to pay tickets Train station/train gate can open
automatically, upon tapping the card, like in hollywood movies.
II) SBI’s Nation First Transit Card (2023) : You can buy this
card from SBI, by paying 2100 or more. Card can pay metro,
buses, water ferries and parking etc.
→Card can also be used for shopping, e-Commerce,
withdrawing money from ATM.
→Card is based on National Common Mobility Card (NCMC)
technology.
8.3) FASTag for paying toll fees at highways (2017) : FASTags
are prepaid rechargeable tags that allow for automatic toll
Collection at electronic toll collection gates Radio-frequency
Identification (RFID) technology.
→2017: National Highways Authority of India (NHAI, a statutory
body under Highway ministry) launched 2 mobile apps
MyFASTag and FASTag Partner to facilitate Electronic Toll
Collection
→NPCi’s has developed National Electronic Toll Collection
(NETC) technology to aid this→ Persons loads up in his mobile
app actives RFID tag in his car when it passes through highway
toll-booth, the money is automatically deducted
9) Mdr: FuLL FOrM: MErChANt dISCOuNt rAtE :
MDR is the fees that a merchant must pay to his (acquirer)
bank for every credit / debit card transaction.

MDR fees is shared among 3 parties 1) customer’s card

issuing bank 2) merchant’s acquiring bank 3) payment gateway
provider.
MDR hurts merchants’ profit margin, discourages them from
adopting Point of Sale (POS) terminals (=card swiping machine)
obstacle to digital economy.

2017 RBI Imposed ceilings on MDR fees i.e. MDR can’t be

more than “x%” of the transaction amount

MDR Subsidy by MEITY : if a banker promotes Rupay debit

card/UPI App→ Banker will not earn MDR fees. So bankers
promote MasterCard & Visacard to their customers and
merchants (instead of Rupay/UPI).

So, 2021-Dec: MEITY (Ministry of Electronics & Information

Technology) announced up to *2,000 MDR Subsidy to
Merchant’s Bank for RuPay debit cards transactions and UPI
transactions.
8.5) ATM AND IT’S TYPE : Automated Teller Machine (ATM)
allow bank customer to withdraw money or check balance
without visiting any branch of a bank. ATM network works on
NPCi’s NFS (National Financial Switch) technology

8.6) Payments Infrastructure Development Fund (PIDF) :

→RBI launched 250cr from RBI + 250 cr from (Banks and Card
Gateway Operators) → 500 cr fund setup.
→Objective? Provide funding/ subsidy to encourage merchants in the
small towns, villages and North Eastern states to adopt point-of-sale
(PoS) card swiping machines.
→Originally, RBI launched in 2021 for 3 years. Then extended for
another 2 years upto Dec, 2025.
10) GLOBAL MONEY trANSFEr
10.1)Financial Messaging Systems: SWIFT→Russia gets
banned because of Ukraine attack

Nations banned from SWIFT: 1) Iran (Capital Tehran) 2) 2022:

Russia got ban, after invading Ukraine. This will make it very
difficult for the Russian banks/ NBFCs/businessmen to send
and receive money internationally.

11) dIGItAL pAYMENt rEGuLAtOrY BOdIES :

→RBI designates senior RBI officials at 21 places across India
as DTO. They hear customer complaints up to 20 lakh against
prepaid payment instruments, Mobile wallets, Apps,
NEFT/RTGS and other digital transactions.
→They can order the company/bank to fix problem and pay up
to additional 1 lakh for mental agony of customer Higher
Appeal to Dy.Gov of RBI.
→If matter > 20 lakh, then matter outside his jurisdiction.
Victim has to approach courts
10.3) DIGITAL PAYMENT RELATED INDEX /
COMPETITIONS/REPORTS BY RBI :

12) CrYptO-CurrENCY & BLOCKChAIN tEChNOLOGY :

Cryptocurrency: is a digital/virtual currency created &
stored using blockchain technology.

Blockchain: A secured decentralized database/ distributed

ledger technology (DLT) that maintains a continuously growing
list of records/transactions. Old entries can’t be deleted, new
entries will be visible to all. Mainly used for running
cryptocurrency network. But it can also store any type of data.
Origin] Anarchist groups lost faith in FIAT MONEY because
USA’s Subprime Crisis (2007) eroded the purchasing power of
US Dollar. They also dislike Banks & Card Companies because
of transaction charges on e-banking, card payments, MDR,
interoperability issues.

2009: An anonymous user Satoshi Nakomoto launched a

cryptocurrency ‘Bitcoin’. Total 21 million Bitcoins, wherein 1
Bitcoin (BTC) 10 Satoshi (the smallest unit).
→Other examples: Ethereum, Litecoin, Digicoin, Laxmicoin,
Ripple, Dogecoin etc
10.4.1 ) Crypto currency observations by EcoSurvey 2023 :
Cryptocurrencies are primarily held by a few big
players/”whales”. So they can manipulate the prices by
manipulating the supply.
Problems related to electricity-consumption, tax-evasion,
abnormal fluctuation in prices, Investors-fraud, no-intrinsic
value etc.

In India, you’ll pay a 30% tax on profits from trading, selling,

or spending cryptocurrency.
10.4.2) CRYPTOCURRENCY BANNED IN OTHER NATIONS :
→Nepal, Algeria, Egypt, Morocco, Turkey, Iran etc: Bitcoin is
illegal further Chinese prohibited the banks from providing
buying/selling/investment services for bitcoin etc
cryptocurrencies.

10.4.2) Crypto currencies as legal tender is in some

countries :

10.4.3) CRYPTOCURRENCY GLOBAL REGULATIONS :

European union (EU)’s rules called the Markets in Crypto

Assets (MICA)). To protect people from scams /frauds in crypto
currency investment.

Crypto-Asset Reporting Framework By OECD (Organisation

for Economic Co-operation and Development) Objective?
Similar to EU’s MICA Rules.
10.4.4 ) CRYPTOCURRENCY LEGAL STATUS IN INDIA →RBI
BAN & SC UNBAN :
→RBI’s Institute for Development and Research in Banking
Technology (IDRBT)- studying how to use blockchain
technology for promoting digital economy.
→However, RBI’s attitude towards cryptocurrencies has been
skeptical/negative. Since 2013: RBI warning Indians not to get
involved in cryptocurrency due to frauds, tax evasion and terror
finance
→2018: RBI directed all banks to stop relations with any
Cryptocurrency company.
→Then some cryptocurrency exchange companies like
CoinDCX etc went to SC alleging that:
→Parliament has not made any law declaring this illegal (unlike
possession cocaine / narcotics.) Even Japan, USA, Singapore
etc not completely banned investment in cryptocurrency but
imposed regulations to control its misuse/fraud. Similarly,
without fully studying the nature/impact of cryptocurrency, RBI
placed a blanket ban which has harmed our fundamental right
to business/profession
→2020-March: SC revoked the RBI ban because : Article:
19(1)(g): All citizens have the right to practise any profession
including those companies dealing with cryptocurrency.
13) CENtrAL BANK dIGItAL CurrENCY (CBdC) :
→2020: People’s Bank of China (PBC) started trials to issue its
paper fiat money Yuan/Renminbi in digital format.
→PBC will use supercomputer to create its fiat currency ‘Yuan’
(also known as ‘Renminbi’) in digital format transfer to recipient
via e-banking e.g. loan to govt, salary to employee etc.
→2020-21: Bahamas, Nigeria started such CBDC currencies.
Britain, Japan, Singapore, Sweden, are also engaged in such
experiments.
→Budget-2022 announced issuance of Digital Rupee using
blockchain technology).

13.1 ) Recent developments :

→Indian CBDC symbol : CBDC rupee e₹ or eINR.
→Presently RBI doing trials/experiment/pilot-studies in two
segments
→Indian CBDC (et) is based on blockchain technology.
→Indian CBDC (et) is a digital token that represents legal
tender.
→(e₹) created under RBI Act, 1934 by amending some sections
in 2022.
→RBI has issued (e₹) on behalf of Government of India.
→(e₹) is a liability of the RBI e.g. similar to cash note “I promise
to pay the bearer on demand sum of 100 rupee”.
→It is being distributed through financial intermediaries, i.e.,
banks
→Just like cash, it (e₹) will not earn any savings interest.
→It offers features of physical cash like trust, safety and
settlement finality.

13.1.2) CBDC/Sovereign Digital Fiat Money / Digital Base

Money will provide following benefit :
→Less Cost printing and transporting physical currency .
→Less Scope for counterfeiting
→High Traceability & less Anonymity. (Whether money is
reaching the intended beneficiary or not and From where did
the businessman accumulate this money, did he pay an
appropriate amount of tax or not)
→Global money transfer more easier.
→Possible to develop programmable currency.
14) NON FuNGIBLE tOKEN :
→NFT is a Digital file photo file (JPEG), Animated image (GIF),
music file (MP3) etc Stored using blockchain Technology.
→NFT may also be used in storing physical assets. E.g.
Ownership document of house, boat, physical-painting etc.
→NFT cannot be subdivided. Their individual sub-units cannot
be exchanged with one another. Because their values are
different based on buyer’s preference. So NFTs are non-
fungible.

(Next :
15) prEvIOuS YEAr quEStIONS OF upSC & KpSC

1) Which correctly describes the meaning of legal tender money?

(UPSC Pre-2018 ?
A) The money which is tendered in courts of law to defray the fee
of legal cases
B) The money which a creditor is under compulsion to accept in
settlement of his claims
C) The bank money in the form of cheques, drafts, bills of
exchange, etc.
D) The metallic money in circulation in a country

2) The term ‘Core Banking Solutions’ correct term?

(UPSC Prelims-2016)
1) It is a networking of a bank’s branches which enables customers
to operate their accounts regardless of where they open their
accounts.
2) It is an effort to increase RBI’s control over commercial banks
through computerization.
3) It is a detailed procedure by which a bank with huge non-
performing assets is taken over by another bank
A) 1 only
B) 2 and 3
C) 1 and 3
D) 1,2 and 3
3) Which one of the following best describes the term “Merchant
Discount Rate” Sometimes seen in news? (Pre18 UPSC)
A) The incentive given by a bank to a merchant for accepting
payments through debit cards pertaining to that bank.
B) The amount paid back by banks to their customers when they
use debit cards for financial transactions for purchasing goods
or services.
C) The charge to a merchant by a bank for accepting payments
from his customers through the bank’s cards.
D) The incentive given by the Government, to merchants for
promoting digital payments by th customers through Point of
Sale (PoS) machines and debit cards.

4) Find Correct Statement(s) [asked in UPSC-Prelims-2017]

1) NPCI helps in promoting the financial inclusion in the country.
2) NPCI has launched RuPay, a card payment scheme
A) Only 1
B) Only 2
C) Both 1 and 2
D) None of them

5) Find correct statement(s) about “Blockchain Technology” [UPSC-

Prelims-2020]
1) It is a public ledger that everyone can inspect, but which no single
user controls.
2) Structure and design of blockchain is such that all the data in it
are about cryptocurrency only.
3) Applications that depend on basic features of blockchain can be
developed without anybody’s permission.
A) 1 only
B) 1 and 2
C) 2 and 3
D) 1,2 and 3
6) Find correct statement(s) about Bitcoin? [UPSC-CDS-2017-1]
1) It is a decentralized virtual currency.
2) It is generated through complex computer software systems.
3) The Reserve Bank of India recognized it as a legal tender in
January 2016
A) Only 1
B) 1 and 2
C) 2 and 3
D) 1,2 and 3

7) Consider the following statements: (KPSC 2022)

I) RBI has the monopoly power of issue of notes and coins
of all denominations in India.
II) RBI keeps and manages the foreign exchange reserves of
India.
III) Open market operations are conducted by RBI via the sale
and purchase of government securities.
IV) During inflation, RBI reduce the Cash Reserve Ratio.
Which of the above statements is/are correct?
A) Only (i), ii) and iv)
B) Only (ii), iii) and iv)
C) Only (ii), iii)
D) Only (i), iv)