Last year on 8th November 2016, The Prime Minister of India, Shree Narendra Modi, took an unprecedented step and shook the entire country, if not the world, by banning almost 86% of the currency in circulation. This move was touted as a move against black money, corruption and a move to push India towards a digital economy. However, a year down the line one might not be wrong if they feel that those goals are far from being achieved. I have compiled a list of what could have been done to ensure more success.
- HDFC Bank recently removed all charges for NEFT and RTGS transfers. One believes that if this step was made mandatory for all banks a year ago, we could have seen more digital transactions than what we see now.
- One of the reason people prefer cash transaction is because using Banks for transactions adds to the cost. It was seen that SBI had increased its charges and fines for non-maintenance of minimum balance and increased the minimum balance requirements. Government could have worked with RBI to ensure that at least in the beginning of the digital economy phase, it would have made it easier for people to trust the bankers and embrace a digital economy whole heartedly. Even today, merchants are seen giving extra discounts for cash payments over digital transactions, simply because it is cheaper for them. Bank machine charges cut into the profits of small merchants which in turn discourages them to embrace digital economy.
- Utility payments like Electricity also charge you some extra amount for making online payment as gateway charges. Other services like Online ticket booking for trains, flights and movies charge you convenience fee for booking tickets online. This is further discouraging.
While all the above-mentioned steps won’t affect people making enough money or those who value time over money, but it is these kinds of services which will make or break the making of a digital economy. One may argue that the convenience of digital economy far outweighs the charges levied. However, margins where every percent counts and people who work between salaries, every charge matters. We cannot have a digital economy unless a transaction in cash is equivalent in every term to a digital transaction, for the cost of maintaining cash far outweighs the cost of waiving of these charges in the longer run.
True.. But government is introducing mechanisms to ensure that people do benefit from digitalization.. Though I agree that steps should be taken towards reducing the cost at the floor level (being banks) but we must also appreciate that they are encouraging people to take up digital modes of payment..