To promote the cashless economy, the government on 5 July 2019 said that businesses with an annual turnover of over Rs 50crore can offer low-cost digital modes of payments and no charges or Merchant Discount Rate will be imposed on them or their customers.
In Union Budget for 2019-20, Finance Minister Nirmala Sitharaman also said 2% tax deducted at source will be levied on cash withdrawals exceeding Rs 1crore in a year from a bank account to discourage the practice of making business payments in cash. The Finance Minister said the Reserve Bank of India and banks will absorb to formulate cashless economy. Lately, digital transactions using mobile payment firms are on the rise. Unified Payments Interface transactions have grown to 754 million in June 2019. IMPS and NETC transactions stood at around 171 million and 26 million, respectively
Moreover, the emphasize on online transactions and card system to promote less cash economy because to eradicate cash from such a huge economy is quite difficult so the government would entitle the cashless economy to less cash economy.
BENEFITS OF CASHLESS ECONOMY
- Efficiency increases as transaction cost across the country may decrease.
- Problems like money laundering, black money and others may reduce because it bought transparency in the system.
- Loopholes in the public system also examine well.
- Government welfare amount for different classes will directly reach to there account with intermediaries.
Impact on individual’s life
- No need to carry currency in wallet.
- No need to wait for depositing cheque in banks.
- No need to stand in queues for ATMs.
- No need to go to a government office to deposit different household bills.
- Save time.
- Restrict Black Money at a certain level.
According to a 2014 study by Tufts University, The Cost Of Cash In India, cash operations cost the Reserve Bank of India (RBI) and commercial banks about Rs21,000crore annually. India is one of the biggest cash economy and GDP would depend on it. So to shift towards cashless economy become difficult to tax evaders who can’t show their true income moreover it is a gift for fiscal part of the country for its growth and to keep things transparent.
Nandan Nilekani termed demonetization as “a defining point in India moving to cashless”
Challenges in cashless economy
- As we know that India has the world’s second largest populated country but on the same hand literary ratio is very low. People are not aware of net banking, online transactions. Even they would not believe that how it is possible that cash has been transferred to the next side. So they completely rely on the currency.
- Use of credit and debit card in the country is limited.
- For the informal sector, it is quite difficult to become cashless.
- Network problem still faces in various places so access to this use is not possible.
- Merchants prefer not to keep records in order to avoid paying taxes and buyers find cash payments more convenient.
- Financial education programmes can improve financial skills and credit management.
- A nationwide financial literacy campaign accompanied by a medium-term strategy to improve access to, and awareness of, electronic payments.
India is ripe for a transition to digital payments. While a cashless economy is not here, the move towards a less-cash economy has begun. Expansion in digital wallet usage and the introduction of specialized payments banks are good moves in this direction. But, a lot needs to be done.