What hurdles exist in making India a cashless economy? Discuss benefits of becoming a cashless economy and suggest how government can speed of this transformation

India has one of the highest cash to GDP ratio in the world. It is known that cash operations cost RBI and commercial banks  almost 21 thousand crores annually.It is desirable for India to go cashless for variety of reasons.

  1. Large population in India estimated to be about 233 million according to a survey are out of banking net and there is need for the financial inclusion of all Indians
  2. Even though they have access to banking system, the ability to use credit, debit cards,Mobile banking and net banking is very less
  3. Most of the merchants do not want go online since these transactions leaves the traces which makes evading taxes difficult.Bringing the behavioral changes is not impossible though little difficult
  4. There is not much awareness among the people about the online transactions and its safety

Benefits of becoming Online:

  1. It will be very difficult to evade taxes hence the creation of black money will be prevented and money paid in taxes will increase significantly which can be used for welfare schemes of the poor
  2. Corruption will be reduced since everything will be paid online. Financial benefits can reach the beneficiary directly though their accounts
  3. Burden of physically carrying the cash will not be there and physical thefts of the cash will be prevented
  4. Operations cost of the paper cash by RBI and commercial banks will be lessened

How Government can speed up :

  1. There is a need for massive campaign to create the awareness among the people of the benefits of cashless economy
  2. Increase the banking coverage to every nuke and corner of the country
  3. Increase the investment in the banking technology and make cashless transaction more easy,more safe and reliable to make it popular
  4. Incentivize the usage of online transactions and discourage the cash payments
  5. Bring in more small finance banks and payment banks and more innovative payment techniques

India will not become a cashless economy in the near future but it can reduce the dependency on the cash transaction. By taking the steps in the right direction India can become a true cashless economy which can have benefits to all.

 

http://www.livemint.com/Opinion/XGbavEnoeP7dZITeh21MRM/Making-India-a-cashless-economy.html

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