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?

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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.

VI-Cashless Transaction:

“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



























                                        YES                                                                               NO




·         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.



Operating Expenses



New Currency

? 2,872

$ 463

Currency chest                      

? 2,400

$ 387


? 10,500



? 1,600

$ 258


? 493

$ 79


? 660

$ 429


? 521

$ 84


? 21,046



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

29.HDFC Bank 

2.     Allahabad Bank


3.     Andhra Bank

31.ICICI Bank

 4.   Apna Sahakari Bank Ltd     

32.IDBI Bank

5.   Axis Bank

33.IDFC Bank

6. Bank Of Baroda

34.Indian Bank

7. Bank Of India

35.Indian Overseas Bank

8. Bank Of Maharashtra

36.IndusInd Bank          

9.Canara Bank

37.Jammu & Kashmir Bank       

10.Catholic Syrian Bank

38.Janata Sahakari Bank           

11.Central Bank of India

39.Kalyan Janata sahakari bank

12.Citi Bank     

40.Karnataka Bank PSP & Issuer

13.City Union Bank       

41.Karur vysya Bank

14.Corporation Bank

42.Kotak Mahindra Bank                       

15.DBS Digibank

43.Lakshmi Vilas Bank  

16.DCB Bank

44.Maharastra Gramin Bank

17.Dena Bank  

45.Mehasana Urban  co-operative Bank

18.Equitas small finance bank

46.Oriental Bank of Commerce

19.Federal Bank

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

24.RBL Bank

52.United Bank of India

25.Saraswat Bank          Issuer

53.Vasai Vikas sahakari bank ltd

26.South Indian Bank

54.Vijaya Bank

27.Standard Chartered Bank

55.Yes Bank

28.State Bank of India

56.The Mahanagar Co-Op. Bank Ltd

57.Syndicate Bank       

62 .Karnataka Vikas Grameena Bank.    

58.Thane Bharat Sahakari Bank 

63. Andhra Pragathi Grameena Bank

59.TJSB Bank

64.Prathama Bank.        Issuer

60.UCO Bank

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.

Allahabad Bank

Andhra Bank

Axis Bank

Bank of Baroda

Bank of India

Bank of Maharashtra

Canara Bank

Central Bank of India

City Union Bank

Corporation Bank

DCB Bank Ltd.

Dena Bank





Indian Bank

Indian Overseas Bank

IndusInd Bank

Karnataka Bank

Karur Vysya Bank

Kotak Mahindra Bank

Oriental Bank of Commerce

Punjab National Bank

South Indian Bank

State Bank of India

Syndicate Bank


UCO Bank

Union Bank of India

United Bank of India

Vijaya Bank

Ratnakar Bank

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.

Saraswat Bank

The Kalyan Janata Sahkari Bank Ltd


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.




10. Direct Benefit Transfer


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/


2.       Connectivity


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.



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


7.       RBI Bulletin , January 2017

8.       RBI Bulletin, January 2018

9.       http://www.thehindubusinessline.com/info-tech/how-to/how-bharat-qr-works/article9605890.ece


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