In the repercussion of the cancellation of the legal tender character of old INR 500 and INR 1000 notes, there has been a surge in the digital transactions through use of credit/debit cards and mobile phone applications/e-wallets etc. To further accelerate this process, the Central Government has come out with various incentive packages and measures for promotion of digital and cashless economy in the country. Digital India is a programme initiated to prepare India for a knowledge future.

The Digital India programme is a leading programme of the Government of India with a vision to transform India into a digitally empowered society and knowledge economy. “Faceless, Paperless, Cashless” is one of stated role of Digital India. As a part of promoting cashless transactions and converting India into less-cash society, various modes of digital payments are available such as Banking cards, USSD (the Unstructured Supplementary Service Data), AEPS (Aadhaar Enabled Payment System), UPI, Mobile wallets, Banks Pre-paid Cards, Points of Sale, Internet Banking, Mobile Banking and Micro ATMs.

 Some of the incentives/measures taken by the Government are –

• The Central Government Petroleum PSUs has initiated to give inventive by offering a discount at the rate of 0.75% of the sale price to consumers on purchase of petrol/diesel if payment is made through digital means.The incentive scheme has the potential of shifting at least 30% more customer to digital means which will further reduce the cash requirement of nearly INR 2 lakh crore per year at the petrol pumps.
• In order to enhance the digital payment infrastructure in rural areas, the Central Government through National Bank for Agriculture and Rural Development (NABARD) will extend the financial support to eligible banks for deployment of 2 Point of Sale (POS) devices each in 1 Lakh villages with the population of less than 10,000. These POS machines are intended to be deployed at primary cooperative societies/milk societies/agricultural input dealers to facilitate agri-related transactions through digital means. This will further benefit farmers of one lakh village covering a total population of nearly 75 crore who will have facility to transact cashlessly in their villages for their agri needs.
• The Central Government through NABARD will also support Rural Regional Banks and Cooeprative Banks to issue “Rupay Kisan Cards” to 4.32 crore Kisan Credit card holders to enable them to make digital transactions at POS machines/Micro ATMs /ATMs.
• Railway through its sub urban railway network shall provide incentive by way of discount upto 0.5% to customers for monthly or seasonal tickets from January 2017, if payment is made through digital means.
• All railway passengers buying online ticket shall be given free accidental insurance cover of upto INR 10 Lakh.
• For paid services e.g. catering, accommodation, retiring rooms etc. being offered by railways through its affiliated entities/corporations to the passengers, it will provide a discount of 5% for payment of these services through digital means. All the passengers travelling on railways availing these services may avail the benefit.
• Public sector insurance companies will provide incentive, by way of discount or credit, upto 10% of the premium in general insurance policies and 8% in new life policies of Life Insurance Corporation sold through the customer portals, in case payment is made through digital means.
• The Central Government Departments and Central Public Sector Undertakings will ensure that transactions fee/MDR charges associated with payment through digital means shall not be passed on to the consumers and all such expenses shall be borne by them.  State Governments are being advised that the State Governments and its organizations should also consider to absorb the transaction fee/MDR charges related to digital payment to them and consumer should not be asked to bear it.
• Public sector banks are advised that merchant should not be required to pay more than INR 100 per month as monthly rental for PoS terminals/Micro ATMs/mobile POS from the merchants to bring small merchant on board the digital payment eco system.
• No service tax will be charged on digital transaction charges/MDR for transactions upto Rs.2000 per transaction.
• For the payment of toll at Toll Plazas on National Highways using Radio-frequency Identification (RFID) card/Fast Tags, a discount of 10% will be available to users in the year 2016-17.

Further to above incentives provided, Government also announced new Yojana’s post demonetization. As India move towards a digital and cashless economy, the Government announced two schemes lucky Grahak Yojana and Digi-Dhan Vyapar Yojana to give cash awards to consumers and merchants who utilize digital payment instruments for personal consumption expenditures. The prizes range from INR 1000 to INR 1 crore and the transactions permitted are from INR 50 to INR 3000 to keep the focus on the common man. The schemes will not only give a boost to cashless transactions, but will particularly bring the poor, lower middle class and small businesses into the digital payment fold, and new way of life.

Future of Cashless and Digital Economy

The year 2017 is an important milestone for India and would mark transition from a largely cash economy to a less cash and a more digital economy. But the buzzwords like “less cash”, ”cashless” and “digital” do not really convey the range and diversity of the transition. It is actually a transition to a new social and behavioral pattern. Migrating from a cash economy to a digital economy requires a big behavioral and social shift, and a recast of the whole mindset. Making gadgets available to the society will not help unless we bring about a social and behavioral transformation.

A surge in non-cash transactions through digital options such as mobile wallets and debit cards is a clear sign that India is gradually embracing the cashless economy, but it remains to be seen if this will continue when new currency notes come into circulation.

However, one of the major concerns would be digital security. It may be noted that to have a smooth transition to a digital economy, the government needs to have a policy of digital security. A strong digital security and low risk will enhance the spread of digital/cashless economy.

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Acquisory News Chronicle - December 2016