Turning India into a Cashless Economy
During the past two decades, India has hard-pressed to become less–cash society. In 1990, the Reserve Bank of India led the development of technological infrastructure that assisted the creation of a payment and settlement ecosystem. Then, in 2007, the Parliament of India has passed the Payment and Settlement Systems Act, after which RBI came up with the vision documents for 2009-12, 2012-15 and 2015-18 in order to promote wider acceptance of electronic payments in the economy. The Government of India has encouraged this shift towards cash-less society with its initiative for digitalization through JAM Trinity: Jan-Dhan Yojana, Aadhaar, and mobile connectivity.The Government and the Central Bank i.e. RBI are making many efforts to minimize the use of cash by encouraging the digital payment devices which includes prepaid cards, smart cards etc. RBI’s work to promote these new varieties of settlement and payment facilities aims to achieve the goal of a ‘cash less’ society. Here, the term cashless transaction society means doing digital transactions instead of cash.
Now-a-days, cash moves electronically. Therefore, the technological advancement along with the spread of electronic payment culture is required to achieve the goal. On November 8th, 2016, the Government of India has withdrawn two highest denominations i.e. Rs 500 and Rs 1000 notes in circulation. The main objective behind this move was to fight black money. This action has encouraged the cashless transactions based on card or digital payments because such transactions won’t get impacted with the withdrawn of high denomination currencies.
As per the RBI Vision document – 2018 for Payment and Settlement Systems reiterates the commitment to promote the use of digital payment methods by the whole society in order to achieve a Cashless society.
“The broad outlines of Vision-2018 revolves around these five Cs — coverage, convenience, confidence, convergence, and cost. To achieve these Cs, Vision-2018 will emphasis on these four strategic initiatives –responsive regulation, robust infrastructure, effective supervision and customer-centricity”. The vision statement is expected to result in:
• Continuous decrease in the share of paper-based clearing instruments;
• Continuous growth in individual segments of retail electronic payments systems viz. NEFT, IMPS, Card Transactions, mobile banking etc.;
• Increase in registered customer base for mobile banking;
• Significant growth in acceptance infrastructure; and
• Accelerated use of Aadhaar in payment systems
Government also formulated certain fiscal measures for encouraging the card culture in 2017 budget. Exempting service charge on card-based and other digital payments was one such step.
For encouraging the Cashless Payment System, the Aadhar based payment system will be a big boost. The advancement of technology has spread mobile banking, internet banking, credit card, debit card and other prepaid instruments, which leads to the growth in electronic payments system. Therefore, we can say that, slowly and steadily, India is moving towards the goal of Cashless economy.
Courtesy: Ms. Radhika Chitkara (Faculty, IMS Noida)