Page 31 - Banking Finance February 2021

ARTICLE

households access to credit through informal systems,
through private lenders and relatives. Forcing them to
shift to cashless payment platforms instantly formalizes
this world of informality and includes them in informal
economy.
g. In the case of cash transactions, transaction tracking is
challenging, but in the case of digital transactions, it is
easy to track a transaction. Root and end-use of all
transactions are on record and easily accessible to Tax
Authority. It will increase the tax base and taxpayers.

Hurdles in making India a cashless

economy:-
cost in India is approx.0.25% of GDP. It is a high cost for a. In our country, more than 60% population are in the
a growing economy like India. The transaction cost of rural area where the mobile or internet infrastructure
each transaction at the digital platform is minimal for is not well developed. The mobile and internet network
both user and service provider. is not available, or the connection speed is not good.
b. Risk Reduction: In this case of digital transaction, the b. More than 80% of labours are working in the
risk of cash getting lost or stolen is minimal. Even if the unorganized sector,which mostly depends on the cash-
card is lost or stolen it is easy to block a credit/debit based economy. So they are comfortable in cash
card or a mobile wallet remotely. transactions. Their transformation to a digital platform
is a difficult task for service providers and regulators.
c. Curbing the Black money in an economy: In a digital
transaction, it is easier to track the illicit transactions c. People are less confident in digital transactions, they
and black money, unlike a cash-based economy in which are comfortable in cash transactions.
money does not come into the banking system. In the d. People are having significantly less knowledge of the use
case of digital transactions, it is easy to monitor and of digital gateway and cyber security threats
track suspicious transactions as all the records are
e. The threats of fraud are more in digital transactions.
available with the system and also available to the
regulator, service provider (Banks). It is easy to find out
the origin and end-use of the fund in case of digital Govt. Initiatives:-

transactions. A. De-monetization in Nov-2016 was a big step to curb the
cash transactions in the financial sector.
d. Tracking Transactions: Transactions done via mobile or
computer applications can be easily tracked with a B. Govt.enhance the mobile coverage and data speed in
simple click. The transaction details are available in the the remote rural area by the introduction of 4G,Govt
system and easily accessible by authorized agencies. opens the business opportunity, and promoting new
e. Convenient: Cash carrying, handling, and security is a partner/vendor in those areas.
big issue, but the ease of conducting financial C. Govt. has taken many initiatives to promote digital
transactions on a digital platform is probably the transactions by giving incentives on it like decreasing the
biggest motivator to go digital. On this platform, the charges for the digital transaction on different platforms
transaction gateway is available 24*7 & anywhere. and reduction /exemption of MDR charges on low-value
User can do their transaction through his/her mobile transactions/small traders/small business entity.
from anywhere. The transaction is done on a real-time D. Some state Govt. providing mobile handset free or at a
basis.
subsidized rate. It will motivate the citizen to go on a
f. Financial Inclusion: At present, India's low-income digital platform.

BANKING FINANCE | FEBRUARY | 2021 | 31