India is no newcomer to the War on Cash. In November 2016, the Prime Minister shocked the nation by demonetizing the two highest banknote denominations representing 84% of the value of banknotes in circulation. In May 2019, the number of ATMs in the country declined in spite of growing demand for cash, because of inadequate ATM interchange fees and tighter regulations leading to increasing maintenance costs for the ATMs. Last 15 August, India celebrated its 73rd Independence Day and Prime Minister Narendra Modi gave a further boost to digital payments, encouraging businesses to “put up signs of ‘Digital Payment ko haan, nakad ko na’ (Yes to digital payment, no to cash)”.
Cash in circulation grew by 17% in 2019
In spite of these measures, cash in circulation has been growing fast. According to the Reserve Bank of India, the value of banknotes in circulation grew by 17% in 2019 and 38% in 2018.
The digital payment methods which fall under the scope of the regulation include RuPay (debit card) and UPI (Unified Payment Interface – an interbank mobile-based system). The Finance Minister has announced that the merchant fees will be waived for these instruments.
Internet shutdowns take a toll on digital transactions
Network access may however become an obstacle for digital payments as the authorities have been regularly shutting down internet as well as voice and messaging services across the country, following the wave of protests against the contentious new citizenship law. According to data from the NPCI (National Payment Corporation of India), the value of transactions contracted by 5% in December compared to November but some areas saw transactions fall by 40%. According to TechCrunch, citing Access Now, a digital rights group, India had 134 of 196 global documented shutdowns in 2018.