100380657609I- IntroductionEstablishment of National Informatics Centre in 1976 was the founding seed of Digital India. Initially it was confined to bring online government services or providing government services at the doorstep of the people which is called E-Governance. E- Governance started taking a broader shape after mid 1990s with the computerization of railway reservation; land records computerization, introduction of computer in public utility services such as telephone, electricity etc. Though being citizen centric these projects could not make desired impact .Digital India program is a flagship program of Government of India for a digitally empowered society and knowledge economy, which will subsequently help in easier implementation of cashless transactions, for performing cashless transactions first of all we need to have on board various services online and various cashless options to pay for them .Digital India gives emphasis to provide Government services electronically to citizens by improving online infrastructure and by increasing Internet connectivity .It plans to connect rural areas with high-speed internet networks. The whole idea of moving from cash-driven economy to cashless economy has gained momentum with demonetization that was aimed to extract black money from the economy. The payment system in Indian economy is changing rapidly to more and more IT based systems.
What is a cashless economy?
In a cashless economy all the transactions are done through electronic channels such as debit/credit cards, Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS),United Payment Interface(UPI), Unstructured Supplementary Service Data (USSD), Aadhaar Enabled Payment System(AEPS) Mobile Wallets, Micro ATM’s.
II- Literature Review
Alvares, Cliford (2009) in their reports “The problem regarding fake currency in India.” It is said that the country’s battle against fake currency is not getting easier and many fakes go undetected. It is also stated that counterfeiters hitherto had restricted printing facilities which made it easier to discover fakes.
Jain, P.M (2006) in the article “E-payments and e-banking” opined that e- payments will be able to check black – An Analysis of Growth Pattern of Cashless Transaction System. Taking fullest advantage of technology, quick payments and remittances will ensure optimal use of available funds for banks, financial institutions, business houses and common citizen of India. He also pointed out the need for e-payments and modes of epayments and communication networks.
Ashish Das, and Rakhi Agarwal, (2010) in their article “Cashless Payment System in India- A Roadmap” Cash as a mode of payment is an expensive proposition for the Government. The country needs to move away from cash-based towards a cashless (electronic) payment system. This will help reduce currency management cost, track transactions, check tax avoidance / fraud etc., enhance financial inclusion and integrate the parallel economy with main stream.
Anil Monga, (2008) in his article “E-government in India: Opportunities and challenges” analyses the experience of few local, state, federal government of India in E-governance practices. It will facilitate easier interaction of Government with Government, Citizen and Business which is the primary goal of governance. Arrangement of hardware and software, creation of a centralised database of various ministries for interoperability, changing attitude of government employees are major challenges. Issue of security and privacy needs much impetus from government.
III-Objectives of the study
The aim behind this Research is:
§ Understanding Digital India and Cashless Transaction.
§ Importance of Cashless Transaction System.
§ Initiatives took under Digital India.
IV- Research Methodology
The study is based primarily on secondary sources of data and information. Different books, journals, newspapers, research papers and relevant websites have been studied in order to make the study an effective one. The study attempts to examine the implementation of Digital India and Cashless Transaction.
V- Digital India:
Digital India program was inaugurated by Honourable Prime Minister of India Narendra Modi on 1st July 2015 with the objective of connecting rural areas of India with high speed internet connectivity and providing digital knowledge, which will subsequently improve digital literacy.
“A cashless economy is one in which all the transactions are done using cards or digital means. Traditionally cashless societies have existed, based on barter and other methods of exchange, presently cashless transactions are possible with the help of cards and other digital payment modes and future of cashless transactions is digital currencies or cryptocurrencies such as bitcoin. “A Cashless Society describes an economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties”.
VII- Procedure of Cashless Transaction
Following is the process of performing a cashless transaction.
Online Railway Reservation system
LOGIN WITH USER NAME AND PASSWORD
ENTER JOURNEY DETAILS
PROCEED WITH BOOK NOW
SELECT ONE OF THE PAYMENT OPTIONS
ENTER CARD INFO OR UPI ADDRESS OR SCAN QR CODE
RECEIVE FAILURE MESSAGE
RECEIVE SUCCESS MESSAGE
· Login with the username and password: User enters the username and password .
· Enter journey details: User enters the details of journey such as passenger’s name, age, sex, contact number, station from and to , date of journey etc.
· Proceed with book now: After checking the availability ,users clicks on book now.
· Select one of the payment options:-Select one of the payment option like BHIM, Net Banking, Bharat QR, Debit Card, Mobile Wallet etc.
· Enter card Information: Enter the card information like pin number.
· Payment Processor: The payment is proceeding.
· Authentication : If authenticates success message is received Yes Or If No then failure message is received.
Demonetization acted as a catalyst for sharp increase in digital transactions. On November 8, 2016, Prime Minister Narendra Modi announced demonetisation of currency notes of Rs 500 and Rs 1000 .Cashless India has assumed significance in the backdrop of demonetisation of high value currency.
1. Cost of Cash- India’s reserve bank and commercial banks face a grand total of about Rs. 21,000 crores (US $3.5 billion) in currency operations costs annually. Majority (86%) of which is borne by the commercial banks.
SUMMARY OF CURRENCY OPERATIONS COSTS
Source: Reserve Bank of India, Annual Reports, survey data and author’s calculations
2. Cash economy aggravates social inequities: Consumers with access to formal financial services pay relatively little to access cash. However, the costs are disproportionately borne by unbanked individuals .The persistence of a cash economy creates social inequity and has the effect of a regressive tax.
3. Taxation- Cashless transactions reduces the scope of tax evasion as hard cash is used less in hand. It reduces the scope of hiding income and when the base of tax payer increases ultimately it leads to a lesser rate of taxation for the whole country.
4. Transparency and accountability It becomes a lot easier to track the flow of money with every transaction being recorded with the buyer, seller aswell as regulatory bodies, making the system much more transparent and compliant. In the long term it leads to better business and investment prospects for the economy as a whole. More currency in bank will mean more circulation of money in the economy, leading to greater liquidity and would eventually mean lesser interest rates (according to the monetary policy of the country).
5. Reduced red tapism – With cashless transactions through electronic means, there is a record of every transaction and people are accountable which in turn reduces corruption and improves service time.
6. Value- The transactions of small value can be paid in exact amount unlike cash transactions, there is no need to pay fringe amount in case the exact amount is not available with either of the parties.
7. Financial inclusion: In rural India, there are 3.5 branches per 100,000 people and less than 1 branch per 100 square kilometres. While it is necessary for financial inclusion that every household should have access to bank, only physical access to a bank is, not sufficient. This is important given that more than 90% of the workforce in India is in the unorganised sector, and physically accessing banks would mean huge opportunity costs for them (measured in terms of daily earnings). A cashless payment system will help to reduce this cost tremendously. An enabling system that promotes cashless transactions would, therefore, be the natural extension of the existing policies directed towards financial inclusion.
8. Financial Records: Electronic mode of payment helps in maintaining record of financial transactions. Recording financial transactions has many advantages. First, it helps the Government to collect tax revenues; second, it can detect, and help curtail, illegal transactions.
9. Lower transaction costs : With appropriate technology and instruments, the need to be physically present during any financial transaction can be dispensed with. This can reduce transaction costs as cashless transactions often reduce processing costs and waiting times.
X- Steps taken Under Digital India
1. Unified Payments Interface (UPI) – UPI is a system that, through a universal application for transaction, connects multiple bank accounts into a single mobile application (of any participating bank) for immediate money transfer through mobile device round the clock 24×7 and 365 days. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience. It uses a single mobile application for accessing different bank accounts. NPCI has launched a mobile app called BHIM to use UPI for fund transfer. It uses Virtual ID for transaction, both QR code and mobile numbers can be used.
Following is the list of Participating Banks
1. Airtel Payments Bank
2. Allahabad Bank
3. Andhra Bank
4. Apna Sahakari Bank Ltd
5. Axis Bank
6. Bank Of Baroda
7. Bank Of India
35.Indian Overseas Bank
8. Bank Of Maharashtra
37.Jammu & Kashmir Bank
10.Catholic Syrian Bank
38.Janata Sahakari Bank
11.Central Bank of India
39.Kalyan Janata sahakari bank
40.Karnataka Bank PSP & Issuer
13.City Union Bank
41.Karur vysya Bank
42.Kotak Mahindra Bank
43.Lakshmi Vilas Bank
44.Maharastra Gramin Bank
45.Mehasana Urban co-operative Bank
18.Equitas small finance bank
46.Oriental Bank of Commerce
47.Paytm Payments Bank
20.Fino Payments Bank
48.Punjab & Maharashtra co-operative bank
21.GP Parsik Bank
49.Punjab & Sind Bank
22.Gujarat State cooperative Bank
50.Punjab National Bank
23.Hasti Cooperative Bank
51.Rajkot Nagarik sahakari bank
52.United Bank of India
25.Saraswat Bank Issuer
53.Vasai Vikas sahakari bank ltd
26.South Indian Bank
27.Standard Chartered Bank
28.State Bank of India
56.The Mahanagar Co-Op. Bank Ltd
62 .Karnataka Vikas Grameena Bank.
58.Thane Bharat Sahakari Bank
63. Andhra Pragathi Grameena Bank
64.Prathama Bank. Issuer
65.Kallappanna Awade Ichalkaranji Janata Sahakari Bank Ltd.
61.Union Bank of India
66.The Mahanagar Co-Op. Bank Ltd.
2. Unstructured Supplementary Service Data (USSD) – USSD service of NPCI provides for the need for immediate low value transactions. The USSD service brings together diverse partners of financial ecosystem, such as banks & telecom service providers and allows customers to avail financial services by dialling *99# from their mobile registered with the bank.
Bank of Baroda
Bank of India
Bank of Maharashtra
Central Bank of India
City Union Bank
DCB Bank Ltd.
Indian Overseas Bank
Karur Vysya Bank
Kotak Mahindra Bank
Oriental Bank of Commerce
Punjab National Bank
South Indian Bank
State Bank of India
Union Bank of India
United Bank of India
Thane Bharat Sahkari Bank
Punjab & Sindh bank
Apna Sahkari Bank
Janata Sahkari Bank
Mehsana Urban Co-Op Bank
Vasai Vikas Sahkari Bank
Punjab & Maharashtra Co-Op Bank
Jammu And Kashmir Bank
Airtel Payment Bank
Apna Sahkari Bank
G P Parsik Bank
Laxmi Vilas Bank
Rajkot Nagarik Sahkari Bank Ltd.
The Kalyan Janata Sahkari Bank Ltd
3. BHARAT- QR
NPCI, Mastercard and Visa has developed integrated payment system ,BharatQR. BharatQR was launched in September 2016, provides users to transfer their money from one source to another. The money transferred through BharatQR is received directly in the user’s linked bank account. BharatQR is interoperable with all banks . Merchants have used it to accept digital payments, as all not have the resources to accept payments through POS terminals. BharatQR principally works by scanning QR codes, but also allows payment through AADHAR number, UPI address and Bank account number along with IFSC code.
4. Mobile Wallets – A mobile wallet is a way to keep cash in digital format. Debit card and credit card information can be stored on mobile application of mobile wallet for payment alternatively money can be transferred through Net Banking, UPI. Instead of using physical plastic card to make purchases, we can pay with smartphone, tablet, or smart watch. An individual’s account is required to be linked to the digital wallet to load money in it. Most banks have their e-wallets and some private companies are – Paytm, Freecharge, Mobikwik, Oxigen, mRuppee, Airtel Money, Jio Money, SBI Buddy, itz Cash, Citrus Pay, Vodafone M-Pesa, Axis Bank Lime, ICICI Pockets, SpeedPay etc
5. Plastic Money – Plastic Money means Debit cards and Credit cards that are used at ATM?s for cash withdrawal and POS machines while shopping. Debit or Credit cards make you burden free from carrying cash.
6.Net Banking – For Net Banking all we need is a bank account with e banking facility enabled on it. You can transfer funds to others account online with Net Banking. All the payments and transfers can be done electronically without going bank.
7.Aadhaar Card – Aadhaar Card enabled payment system allows a person to pay using his aadhaar card if it is linked to his bank account. In AAEPS payment is done using biometric data of the person i.e finger prints,retina scan.
6. BharatNet – The Government of India entity Bharat Broadband Network Limited(BBNL) is custodian of project BharatNet .It aims to connect all the 625,000 villages of India by December 2018. with optical fibre network up to Panchayat level. The government had planned to make this network available to telecom service provides and as a highway for transmission of voice, data and video in rural areas.
8.FEES IN VARSITY
10. Direct Benefit Transfer
11. UN-RESERVED TICKET THROUGH MOBILE APPLICATION (UTS APP)
XI- Problems in Effective Implementation
1. Internet Infrasrtructure- India simply lacks the routers, fiber optic links and servers needed to expand access. Relatively few public Wi-Fi spots exist, and broadband connections with faster speeds require infrastructure that is rarely found in urban low-income areas, much less rural ones. Mobile Internet connections are even worse, with patchy connections where customers often complain how 3G normally works at the speed of 2G. Users often find gaps in network coverage depending on their location.” Laying enhanced FTTH to distant places is a challenge for the service providers. Internet service provider (ISP) will roll-out its services only if they get a reasonable ROI. Not everyone is enthusiastic about it and it should also be considered as to how many Indians have enough disposable income to spend on the internet. http://www.cxotoday.com/story/internet-for-india-still-long-way-to-go/
3. NON availability Of POS machine
4. Financial Inclusion
5. Low Literacy Level
6. Security Concerns- Virus attacks –
7. Traditional Banking Belief
8. Awareness- Low level of awareness is another hindrance. Not everyone is aware of the benefits of high speed internet and some do not want to invest in high speed internet which of course comes at a high cost. So instead they settle for comparatively low speed internet which helps them in basic uses such as using emails.The situation is far more depleting in the rural and remote areas. According to a 2016 survey conducted by the Internet and Mobile Association of India, about a fifth of respondents who lived in urban areas and three quarters of rural residents said they didn’t know about the internet and therefore did not use internet.http://www.cxotoday.com/story/internet-for-india-still-long-way-to-go/
9. Internet penetration-India ranks at number 3 for the number of Internet subscribers. But the Internet penetration in India is quite low as compared to the other countries of the world. The penetration rate of India is 33.22 % while U.S.A ,China ,Brazil, Japan and Russia has 88.5,52.2,66.4,91.1 and 71.3 % respectively.
TREND OF INTERNET SUBSCRIBER BASE
Telecom Regulatory Authority of India The Indian Telecom Services Performance Indicators July – September, 2017
XII- Future Trend of Cashless Transaction in India
According to RBI Bulletin, Cashless Transaction in India increased day by day. From different transaction system E-wallet (PPI) system is going to be more popular, the statistics in report shows that , in Oct-2017 and Nov-2017 total value transaction done using E wallet or M- wallet was 86.80 and 93.88 (Rs. In Billion) respectively as compared to same period of 2016, it was 33.85 and 33.05 (Rs. In Billion) respectively. According to the survey conduct by Cash-karo India (cash-back and coupons site), After Demonetization i.e. from NOV-2016 , E-wallet payment method is more preferred by customers than any other payment methods. According to this survey, 1% users preferred cash as payment method, 18% for debit/credit cards,23 % for Net banking and 59% users preferred E-wallet as payment method. And in future also E-wallet system will be more preferable.
IT- Information Technology
NPCI- National Payment Corporation Of India PPI- Prepaid Payment Instruments
IFSC- Indian Financial System Code
UPI- United Payments Interface
RFID-Radio Frequency Identification
USSD- Unstructured Supplementary Service Data
BHIM- Bharat Interface For Money
POS- Point Of Sale
1. Alvares, Cliford,(2009) ?The problem regarding fake currency in India.? Business Today; 3/8/2009, Vol. 18 Issue 5, p24-24.
2. Jain, P. M. (2006). E.-payments and E- Banking. Indian Banker, March. pp.108-113
3. Ashish Das and Rakhi Agarwal, Cashless Payment System in India- A Roadmap
4. Monga, A. (2008). E-government in India: Opportunities and challenges, JOAAG, Vol. 3. No. 2
5. Benjamin D. Mazzotta, Bhaskar Chakravorti – The Cost Of Cash In India, Page- 8
6. THE COST OF CASH IN INDIA
7. RBI Bulletin , January 2017
8. RBI Bulletin, January 2018