Cashless India: Overview of The Mission

Cashless India is a mission launched by the Government of India led by Prime Minister Narendra Modi to lower the dependency of Indian economy on cash and to bring hoards of stashed black money lying unused into the banking system. The country commence upon this transition to a cashless economy when the government took the major step of demonetization of old currency notes of Rs 500 and Rs 1000 on November 08, 2016.

India has been using electronic payment systems for many years now. Nonetheless, the retail sector still has majority of cash transactions, and payment through cards is yet to pick up. Cards (both credit and debit) are one of the safest and convenient modes of cashless payment in retail market. The card payments data shows that even though we have 19 million credit cards, 190 million debit cards and half a million point-of-sale terminals, on an average there is just one transaction yearly for every debit card and 11 transactions annually for every credit card. While trying to look for the reasons of poor use of payment cards, the costs involved in India by holding independent interactions with all players in the system— the banks, the card companies and the traders; and by comparing the practice in different countries. The objective is to rationalize the costing in such a way that the merchants and consumers prefer card payments as against cash and it becomes the attractive mode of payment even in the country’s remote areas. With the rationalization in costs, the banks and card companies would run on to gain, as revenues would increase due to increase in usage and user base.

Moreover, for the Government, with the new pricing the gain will be twofold— firstly there will be significant reduction in the growth of currency management cost, and secondly, the system will produce volumes of data on spending behavior of individuals that can be cast-off by the Government for developmental planning. It is expected that the report would prove helpful for RBI and Government to further increase their endeavor towards bringing in an efficient cashless payment system in the country.

Cashless India is a recently introduced phenomenon targeted to bring a transformation in the country’s economy by the Indian government, to change the cash-based economy into cashless through digital means. However, still there are various obstacle to be addressed if we want to make India cashless in true sense. India is a huge country and the convenience of making transactions through the online mode is not available over the country. In small cities and villages, the people are mostly suffering due to acute cash crunch situation. To make India cashless in veracious sense, investment is required to be made in magnifying the facility required on a mass scale for cashless transactions across the country.

Handling the flow of cash with digital technology has an extent of advantages. Cashless transactions have made people keep all their cash into the bank and henceforward, liquidity in the banking system has increased. Also, it has stopped the flow of black money, up to some extent. Now the banks and financial institutions have more money to lend to the people to support the growth of Indian economy. The other most important advantage is that this situation will make people pay their taxes in a transparent manner; hence the government will have more money to run various schemes meant for the welfare of the public. Conclusion: Post-demonetization, the people have finally started believing in the power of the plastic money in the form of credit card/debit card, and other channels of electronic payment. Online banking has gained cliff due to unavailability of enough cash in the market. Moreover, E-commerce modes of making payments have also become well known, as most of the people have now started making payments of even Rs 50 through the digital modes. All these developments are considered to be excellent for the healthy growth of the economy.

India continues to be driven by the use of cash; less than 5% of all payments happen electronically on the other hand, the finance minister, in 2016 budget speech, talked about the idea of making India a cashless society, with the aim of curbing the flow of black money.