Wednesday, 1 June 2016

CivilsDially:: Economic Planning:: Cashless Society. Can India be one?

India continues to be driven by the use of cash; less than 5% of all payments happen electronically. But, the FM, in his budget speech, talked about the idea of making India a cashless society. What exactly is a cashless economy? See if you can discuss around some of these questions and help us analyse various aspects of this financial evolution in India.

Key News and Op-eds

Start-ups find fuel in digital banking project


  1. Unified Payment Interface (UPI) is the National Payments Corporation of India’s (NPCI) most ambitious project
  2. Aim: To bring digital banking to 1.2 billion people in the country
  3. Transfer: Also to allow anyone with a bank account to quickly create a virtual payment address
  4. The money can be transferred using just the phone number or the Aadhaar number
  5. Charges: It is built on Immediate Payment Service (IMPS) which has lesser charges as compared to Credit and debit cards
  6. Security: End-to-end security and data protection on UPI is one of the key areas of concern among customers

RuPay gains market share, still long way to go

  1. Context: A recent survey on electronic & card usage in transactions
  2. Findings: India remains a potentially large market for electronic payments, but a strong push to expand acceptance infrastructure is needed
  3. Usage of digital payments is increasing all across India but that has not led to a decrease in card usage
  4. Use of electronic channels for accessing banking and payment services is on the rise
  5. India is still a cash intensive economy with cash-to-GDP ratio of over 12%

Tech-savvy Indians shop with ‘cashless’ wallets

  1. Context: Growing popularity of e-payments and mobile wallets among the youth in the country
  2. Background: Recently, govt. cleared the implementation of a few measures to promote digital and card-based payments to curb cash use in the system
  3. Measures: It includes withdrawal of surcharge, service charge or convenience fee on card and other digital transactions
  4. Impact: This makes RBI’s work easy to bring in accountability and transparency in each financial transaction
  5. Future: Country is heading for a cashless economy with a change in the way netizens make their day-to-day transactions

Learn more about Mobile Wallets

  1. Basics: It allows users to instantly send money, pay bills, recharge mobiles, book movie tickets, send physical and e-gifts both online and offline
  2. Benefits: Simple and convenient user interface, low risk, high security standards for customers
  3. Regulation: Recently, the RBI had issued certain guidelines that allow the users to increase their limit to Rs 1,00,000 based on a certain KYC verification
  4. Future: The mobile wallet market in India is projected to reach $6.6 billion by 2020
  5. Statistics: The rough estimate shows there are more than 100 million wallet users in India

Learn about 4 kinds of wallets in India

  1. Open wallets: It allows one to buy goods and services, withdraw cash at ATMs or banks and transfer funds. Ex: Vodafone m-pesa
  2. Semi-open wallets: It does not allow cash withdrawal, a customer has to spend what he loads. Ex: Airtel Money
  3. Closed wallets: In this, a certain amount of money is locked with the merchant in case of a cancellation or return of the order, or gift cards. Ex: e-Commerce wallets
  4. Semi-closed wallets: It does not allow cash withdrawals or redemption, but allows one to buy goods and services from listed merchants and perform financial services at listed locations. Ex: Paytm

Boost to cashless payments

  1. Context: Cabinet approved measures to promote payments through cards and other electronic means
  2. Aim: to check tax evasion and transition towards a cashless economy
  3. Steps: withdrawal of surcharge, service charge, convenience fee on cards and digital payments
  4. Also no extra charges on tickets booked on IRCTC website or on payment of water, telephone, electricity bills

Cabinet nod to incentivise cashless transactions

  1. Context: Govt. measures to curb the flow of black money in the domestic economy
  2. News: The Union Cabinet approved several steps to promote cashless transactions
  3. Reason: To reduce tax avoidance, migration of govt payments and collections to cashless mode, discourage transactions in cash
  4. Measures: Mandatory card-based or electronic payments beyond a prescribed threshold
  5. The withdrawal of any additional charge currently imposed on card or digital payments by various govt entities
  6. The introduction of the required infrastructure for digital payments in all govt offices
  7. The rationalisation of the merchant discount rate on card transactions

Sweden’s remarkable tilt towards a cashless future

  1. Sweden has been lured by the innovations that make digital payments easier.
  2. It is also a practical matter, as many of the country’s banks no longer accept or dispense cash.
  3. However, consumer organisations and critics warn of a rising threat to privacy and increased vulnerability to sophisticated Internet crimes.
  4. In Sweden, cash represents just 2% of the economy, compared with 7.7% in the U.S.

RBI backs move to encourage e-deals

Earlier this month, the government released a draft proposal that, if accepted, will see income tax benefits for consumers, who predominantly use electronic transactions for payments.
What else? Key Issues to be addressed: 
  1. The advances-related frauds continue to be the major concern for banks, especially because of their size and far reaching implications to their financial soundness and integrity.
  2. A special variety of frauds, which are increasing in number and in terms of speed, are the cyber frauds.
    Afterthoughts:
Banks should make an effort to really know their customers — their backgrounds, stated activities or profession, their signature style of operation and digital footprint in the case of online transactions, etc.
This would allow a bank to draw up a robust customer profile and put up a red flag if there is any exception to the norm.

[Discuss] Is India Ready for a Cashless Economy?


                                                                                                                                    Livemint 
Posted by at

No comments :

Post a Comment

Subscribe to: Post Comments ( Atom )