Q. What do you understand by a cashless economy? Can it become a reality in India? While highlighting the challenges of it, also enlist the ways which can help India become a successful cashless economy.
A. Cashless Economy
When financial transactions are not conducted through the physical form of money (like coins, notes, etc.) but through the transfer of digital information between the parties.
It includes approval of the regulating authorities to use alternate media for doing the financial transactions, (majority digital medium) so as to improve transparency & accountability of monetary transactions.
Reality in India
It involves tackling a few hurdles: –
- Behavioral aspect of transacting in cash.
- Digital illiteracy
- IT infra lacking (AAA) (includes interact connectivity, smartphones)
- Security/safety of online transaction (cybersecurity)
- Lack of banking (AAA)
- Reluctance on Merchant‟s aspects in terms of them falling under tax preview
- Internet suspensions (during riots, protests, etc)
- Interoperability of e-wallets
- Disincentives like money not passing through in one go
How India can become cashless
- Information, Education, Communication (IEC) Incentives – District administration to be incentivized so that people could transact more using digital platforms (NITI)Digital Infra, PoS to be incentivized
- Merchant Discount rate to be eliminated/subsidized.
- Ratan Watal committee recommends using cards to various transactions.
- Cybersecurity to be pushed, cyber Swachta Kendra
- Cash transaction tax might be implemented to discourage cash
- Banking to be expanded (so that people can have accounts to transact from) payment bonus to being an incentive
- Cyber insurance
- Ethical hackers
- Clarity on regulations
- Faith resolution of disputes
5 Cs of RBI
3) confidence in the system
4) convergence of various service provider
India at present is taking these steps
- Bharat Bill Payment Network
- Payment Banks
- Private Initiatives like PayTM
- Mobile Wallets of Banks
- Awareness generating initiatives
- The first step could be less-cash than cashless.