After note ban, will Modi govt now ban cheque books for its digital push?

CAIT Secretary General Praveen Khandelwal said the government needs to encourage the use of debit and credit cards

 

Business News : After deciding to revoke the legal tender of Rs 500 and Rs 1,000 currency notes in November last year, the Narendra Modi -led central government might now be working on another disruptive step to boost digital transactions — banning the cheque book. A senior functionary of the Confederation of All India Traders (CAIT) on November 16 said the Centre might withdraw the bank cheque book facility in the “near future” to encourage digital transactions.

CAIT Secretary General Praveen Khandelwal said the government needed to encourage the use of debit and credit cards. “In all probability, the Centre may withdraw the cheque book facility in the near future to encourage digital transactions,” he said.

Impact of cheque book facility withdrawal

Demonetisation was a big disruption for most Indians, right from poor labourers to big industrialists. Now, the withdrawal of the cheque book facility could have a massive impact as well. Most business transactions are conducted through cheques. According to experts, 95 per cent transactions currently take place via cash or cheques.

Since cash transactions have declined, transaction by cheque might have increased after demonetisation.

Use of cheque in India

Cheques are fairly popular in SME payments. By taking a PDC (post-dated cheque) against the delivery of goods, a supplier secures payments due in future from its customer. People pay by cheques while buying land and house, too.

Many landlords now take rent from tenants via cheque. Since November 8, 2016, digital payments like BHIM have grown. However, their sweet spot has been small-value payments (two to three figures). The retail and commercial payment usage strongly suggests that cheque is a very compelling method of payment for large-value payments (four figures and above).

Click to Read → Cheque Book Ban

Demonetisation: Are your digital transactions secure?

There are no easy solutions regarding securing oneself in the cashless digital world

Latest News -  Paper money is becoming passe as the year comes to an end. The New Year brings in the promise of India going cashless with the population of 1.3 billion being pushed into a digital economy.

Today many users are being exposed to plastic money for the first time. Even the most learned people make mistakes in the digital world and that can prove very costly. Hence, for first-time users, it is a minefield out there and negotiating it needs a lot of tact.

Earlier this year, 3.2 million credit and debit card details, with a bulk of them from India's largest banker the State Bank of India, allegedly got compromised and till date, the investigating agencies have not been able to make much headway.

In a country where, according to UN figures, about 287 million adults are still illiterate how safe is it to indulge in cashless transactions?

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Digital India: Why people are ignoring bank UPIs and flocking to Paytm instead

Post demonetization, people flocked to digital wallets for mobile payments instead of bank apps

Long before demonetization and a scramble to find alternatives to cash, India had laid out a unique tech infrastructure for a digital economy.

Bill Gates was so impressed with it on a recent visit that he exclaimed: “India is on the cusp of leapfrogging!”

But leapfrogging only happens with mass adoption. Although Aadhaar had identified and authenticated a billion Indians, and UPI made mobile payments as simple as sending a message or mail, banks dragged their feet over it.

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• Slip between the cup and the lip

• The Paytm tipping point

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To a question from Tech in Asia on how the Paytm app will be different from UPI-powered apps by traditional banks, Vijay Shekhar Sharma pointed immediately to customer experience. “Banks are not great at rolling out UPI,” he said. But for Paytm, “this is the truest opportunity to build something designed for unique Indian needs.

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Save Rs 900 on petrol bill: After cash pain, some cashless gain

With the govt providing discounts in some areas to push digitisation, consumers should try and maximise benefits

The government, a month after implementation of demonetisation, has decided to give a push to digitisation. On Thursday, Finance Minister Arun Jaitley announced a slew of incentives for people willing to transact digitally.

Making digital payment on fuel purchases from petrol pumps will be cheaper by 0.75 per cent. New policies bought from customer service portals of Life Insurance Corporation (LIC) and public sector general insurance companies will attract a discount of eight per cent and 10 per cent, respectively.

There are a number of other transactions as well on which the government has decided to give discounts, provided one is willing to take the cashless route. Says Madan Sabnavis, chief economist, CARE: “The government is almost following a placatory approach with these incentives, after almost forcing people to go digital in the first month. This is a good approach, as it makes people more comfortable.”

Some petrol pumps charge two per cent on credit cards, a deterrent for many people. Now, with the government giving a discount, many will be encouraged to use cards. “However, to encourage the use of digital payment more aggressively, I believe, the government should give such incentives in many other areas,” added Sabnavis.

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Demonetisation: Check out govt's 7-point strategy to contain currency crisis

When Prime Minister Narendra Modi on November 8 said that Rs 500 and Rs 1,000 currency notes would cease to be legal tender within a few hours of the announcement being made, the demonetisation move was lauded by some as a major assault on the flow of black money, fake currency and corruption. Even as most people rushed to get their existing currency notes exchanged, few could foretell the extent of cash crunch that would befall the common man in the days to come.

However, ever since banks and automated teller machines (ATMs) resumed exchange of old notes and withdrawal of new currency, the queues for these seem to only be growing. While some continue to laud the government for its initiative to cleanse the economy for the long-term good, many Indians have been facing immediate hardships for want of usable cash in hand.

1. Indelible ink
2. Turning to god
3. Jan Dhan accounts
4. No misuse of bank accounts
5. Task force
6. Ensuring supply of provisions
7. Crackdown on social-media rumours

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Demonetisation: Can India go cashless?

Days after the Narendra Modi-led government decided to demonetise Rs 500 and Rs 1,000 currency notes, the queues outside banks and ATM centres only seem to get longer. With people scrambling to exchange their old banknotes, the use of plastic money in the form of debit and credit cards is being touted as the way forward. Even the government is promoting cashless transactions to enable people to get by.

1. But how feasible is the idea of a cashless India?
2. Is the total number of cards enough for India to go cashless and still transact freely?
3. What is the current status of POS terminal penetration in India?
4. What do people use debit cards for?
5. What are the challenges in increasing the spread of plastic money in India?
6. Should India go cashless?
   

Economic costs of a money supply crunch and the difficulties in using plastic money on a larger scale across a wider geography in India make it difficult for India to go cashless. Given India’s economic reality, telling people to go cashless might be like telling the poor to eat cake if they can’t find any bread.

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