"India Pilots CBDC-Based Food Subsidy Transfers in Two Union Territories"
Central Bank Digital Currency (CBDC)
sovereign digital currency issued by RBI, a direct liability on its balance sheet, equivalent to physical cash
Programmable money
currency coded with spending conditions (e.g., restricted to food purchases or time-bound), a defining CBDC feature
Direct Benefit Transfer (DBT) was formally launched in January 2013 to route government subsidies and welfare payments directly into beneficiaries' bank accounts, bypassing intermediaries and eliminating leakages. The programme rests on the JAM Trinity — Jan Dhan accounts (financial inclusion), Aadhaar-linked identity (unique identification), and Mobile connectivity (last-mile reach) — which together enable targeted, verifiable cash delivery. The DBT Mission, housed under the Cabinet Secretariat, coordinates implementation across ministries, while the Public Financial Management System (PFMS) tracks fund flows in real time.
Parallel to this, the Reserve Bank of India (RBI) has been developing the Central Bank Digital Currency (CBDC), also called the Digital Rupee, as a sovereign digital form of legal tender. Unlike commercial bank deposits or UPI-based transfers, the Digital Rupee is a direct liability on the RBI's balance sheet — equivalent in legal status to physical currency but existing in programmable, wallet-based digital form. The RBI launched retail CBDC pilots beginning in late 2022, exploring use cases in payments, cross-border settlements, and, most recently, welfare delivery.
The Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) is the flagship food security programme providing free foodgrains to eligible beneficiaries under the National Food Security Act (NFSA). Integrating CBDC with PMGKAY represents a structural evolution in how India delivers food subsidies — moving from physical grain distribution through the Public Distribution System (PDS) to a digitally traceable, wallet-based subsidy transfer model.
The CBDC-based DBT model works as follows: instead of transferring a cash equivalent into a conventional bank account or distributing physical grain through a fair-price shop, eligible PMGKAY beneficiaries receive food subsidy value directly into a CBDC wallet as programmable Digital Rupee tokens. These tokens can then be spent exclusively at empanelled merchants — typically authorised grain dealers — through a secure, real-time digital payment mechanism. The programmability of CBDC is the critical design feature here: unlike cash, CBDC tokens can be coded with conditions (e.g., restricted to food purchases, time-bound validity), making diversion to non-intended uses structurally difficult rather than merely administratively monitored.
A key distinction from UPI is instructive. UPI is a payment rail — it moves money between bank accounts in real time, but the underlying money remains commercial bank money (a liability of the bank, not the central bank). …
Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is not correct?
Consider the following statements with respect to 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?
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?
With reference to the CBDC-based Direct Benefit Transfer (DBT) model being piloted under PMGKAY, consider the following statements:
1.Beneficiaries receive food subsidy as Digital Rupee tokens directly into CBDC wallets instead of conventional bank account transfers.
2.The Digital Rupee tokens under this model are programmable and can be restricted to purchases at empanelled merchants only.
3.CBDC wallet-to-wallet transactions are recorded in commercial bank statements, enabling audit by scheduled banks.
Which of the statements given above is/are correct?
Which of the following correctly distinguishes the Digital Rupee (CBDC) from UPI-based transfers in the context of welfare delivery?
1.The Digital Rupee is a liability of the RBI, whereas UPI moves money that is a liability of commercial banks.
2.UPI requires interbank settlement for each transaction, whereas CBDC wallet-to-wallet transfers require no such settlement.
3.The Digital Rupee can be programmed with spending conditions, whereas UPI transfers cannot be similarly conditioned at the currency level.
Select the correct answer using the code given below:
Assertion (A): Integrating CBDC with welfare delivery embeds accountability into the currency instrument itself, reducing dependence on post-hoc audit mechanisms.
Reason (R): CBDC tokens are programmable and every wallet-to-wallet transaction is recorded on the CBDC ledger in real time, enabling end-to-end traceability of public funds.
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