The Reserve Bank of India (RBI) launched the pilot project of the Central Bank Digital Currency (CBDC) in December 2022 as India’s official digital legal tender. Unlike bank deposits, CBDC is treated as electronic cash and is stored in CBDC wallets offered by select banks. What is the interest rate offered on balances held in CBDC wallets in India?​

Correct option is D

CBDC wallets are equivalent to holding currency in digital form. Just like physical cash, they do not earn any interest. This differentiates them from bank accounts, where deposits generate interest.

Knowledge Booster:

• India introduced two types of CBDC pilots: CBDC-R (Retail) and CBDC-W (Wholesale).

• CBDC is not a deposit instrument; hence, no interest applies.

• Globally, most central banks (like the US Fed and European Central Bank) also design CBDCs as non–interest-bearing instruments to prevent disruption of the traditional banking system.