After Prime Minister Narendra Modi demonetized Rs 500 and Rs 1000 notes, cashless transactions really took off in India. The Modi Government pushes on to make India a cashless economy like the UK or Sweden. In this push to make India a cashless economy, there is talk of the Modi Government banning cheque books.
The Modi Government may withdraw the cheque book facility at banks to promote digital transactions in India. Now to the big question. How many transactions in India take place through cash or cheques? Studies have shown that more than 95% of transactions in India take place through cash and cheques. Chances are cheque transactions could have increased after demonetization.
Should the Modi Government ban cheque books? Let's find out. Want to know more on FDs and Savings Bank accounts? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
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If you take a look at RBI Data, digital transactions rose 31% from November 2016 to September 2017. If there were 100 digital transactions before the note ban, today, there are around 180 digital transactions. So digital transactions have definitely taken off after demonetization. But...Can a ban on cheque books propel digital transactions to the next level?
In India a lot of citizens still withdraw cash from ATMs or banks. Many still use cheque books to withdraw cash. Take a look at this. Citizens of our country have been withdrawing cash from ATMs and paying for groceries and other requirements in cash. What this means is a lot of people in rural areas of India, still withdraw cash to pay shopkeepers and also for other payments.
If the Modi Government wants to ban cheque books it must do so slowly. There is no need to rush. This would give citizens in rural areas who have not yet adopted digital modes of payment, time to do so.
If cheque books are banned, it could cause a lot of inconvenience to traders and businesses. A lot of transactions for traders are through cash and cheques. Their businesses could be hurt. A better idea would be trying out only digital transactions in the branches of metro cities on a pilot basis. If this succeeds, citizens in rural areas could adopt digital transactions.
Banks charge traders 1% on payments made to them via debit card and 2% on payments made via credit card. So some traders hesitate to accept card payments.
If the Modi Government gives a subsidy directly to banks, all these charges could be waived off and traders would happily accept card payments.
Banning cheque books could be a good idea to promote digital transactions in India. This should not be done in a hurry. Citizens in rural areas need some more time to adopt digital transactions. Be Wise, Get Rich.
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