India’s Prime Minister: Yes to digital payment, no to cash
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Last 15 August, India celebrated its 73rd Independence Day and Prime Minister Narendra Modi reinforced the idea of digital payments, encouraging businesses to “put up signs of ‘Digital Payment ko haan, nakad ko na’ (Yes to digital payment, no to cash)”, reports The Times of India.
India faced a series of dramatic consequences when PM Modi made the bold decision in November 2016 to demonetise the two highest value banknotes of Rs 500 and Rs 1000 banknotes, accounting for 84% of the value of cash in circulationThe value (or number of units) of the banknotes and coins in circulation within an economy. Cash in circulation is included in the M1 monetary aggregate and comprises only the banknotes and coins in circulation outside the Monetary Financial Institutions (MFI), as stated in the consolidated balance sheet of the MFIs, which means that the cash issued and held by the MFIs has been subtracted (“cash reserves”). Cash in circulation does not include the balance of the central bank’s own banknot... More. What began as a move to eliminate tax evasion and money launderingThe operation of attempting to disguise a set of fraudulently or criminally obtained funds as legal, in operations undeclared to tax authorities, and therefore not subjected to taxation. Money laundering activities are strongly pursued by authorities and in most countries, there are strict rules for credit institutions to cooperate in the fight against money laundering operations, to declare and report any transactions that could be considered suspicious. More to regulate the hoardingThe term refers to the use of cash as a store of value. However, the term has a negative connotation of concealment, and is often used in the context of the war on cash. See Precautionary Holdings. More of ill-gotten cashMoney in physical form such as banknotes and coins. More, is now described as a failed initiative by the Reserve Bank of India who reported that 99% of old bills removed from circulation eventually found their way back into the system and that cash in circulation grew by 37.7% between March 2017 and March 2018.
“As a consumer, I do not have the confidence to not withdraw cash, because at 70% or 80% of places where I need to spend the money, digital payments are not accepted,” said Navtej Singh, the CEO of digital business at Hitachi PaymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More Services Ltd., which supplies automated teller machines and point-of-sale machines across the country.
Despite the increase in cash demand by Indian citizens, India has seen a gradual decline in the number of ATMs due to tighter regulations that makes the maintenance of cash a costly affair. Now, with the PM’s adamant push towards digital, it will be interesting to see how his latest pronouncement will affect the payments industry.
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