We print too much paper money in India. In 2010-11, we had Rs 95 lakh crore of currency in circulation – the vast bulk of it in paper notes.
Annually, our banks spend nearly Rs 8,000 crore in printing, clearing and transferring cash from one person to another, including corporate accounts, with another form of paper currency – the ubiquitous bank cheque.
As if this were not enough, we have things called Sodexo and Ticket vouchers, which are another kind of paper cash. They are issued by private parties, and companies give them out to employees as a form of tax-free compensation. These vouchers can be used only to buy food at restaurants or provisions of certain kinds.
Paper currency was originally issued because it was cheaper than minting and lugging metal coins around. Now, their lifecycle is coming to an end, as they have developed their own cost issues.
Printing paper money costs even more money than it did earlier. It costs Rs 25-40 for a single cheque to do its job – transfer cash from one account to another. It costs Rs 3-and-odd to print each Rs 500 and Rs 1,000 note. It costs nearly 50 paise to print a Rs 5 note. (Now you know why they are gung-ho about minting Rs 5 coins rather than notes).
If the cost of printing paper money is so high, why use paper at all? After all, you can transfer money electronically, you can pay by credit card, you can have smart cards loaded with cash, and you can also transfer money through mobile accounts now.
Well, the good news is that the finance ministry wants to end our love affair with paper money. It has decreed that at least state-run banks must completely stop using cheques for the following purposes: payments to customers, staff, and vendors and suppliers. Moreover, “disbursement of loans and payments towards investments should be made only through the electronic mode,” reports The Economic Times.
Simultaneously, the Reserve Bank of India (RBI) has put out a vision document whose goal is to reduce the use of paper money. Its vision is not to move to a cash-less society, but a “less-cash society”. (If you have trouble falling asleep, you can read the whole bally document here.)
So, don’t fret too much of your bank suddenly raises charges on issuing cheque-books. They will justify it in the name of the RBI’s less-cash vision. Any excuse to charge you more. But it’s in a good cause.