Government notables led by Finance Minister Arun Jaitley are arguing that the decision, spearheaded by Prime Minister Narendra Modi, was aimed at making India a cashless society. But unless the government is successful in ensuring adequate cash flow in banks and ATM machines over the next few days, the country will truly become cashless.
For the past three days, conversations in families and offices have often begun and ended with the amount of money in physical wallets, not e-wallets. Unless adequate currency notes are re-introduced and made available to people without having to spend hours standing in serpentine queues, we may soon be witnessing cash riots. Already, reports from different parts of major cities are trickling that police is being called frequently to manage crowds milling inside and outside banks and ensuring that frayed tempers do into spill over into bloody battles.
In the past two days, I'm not alone whose inbox has been flooded with offers from banks and other agencies for credit cards and advisories on how to make optimum use of electronic transactions. Since Modi’s announcement that government has demonetised existing Rs 500 and Rs 1,000 notes, several newspapers have published full-page advertisements of companies offering e-wallet facilities. Ola and Uber have also sent emails and placed adverts announcing payments for services can be made now by credit card.
These developments, coupled with statements like Jaitley’s that the “logical step was India has to move towards the cashless society” has made it appear that the demise of currency notes and transactions made by them is imminent. But is this possible in a country where a report, sourced to the banking division of the finance ministry revealed that just an estimated 28-32 percent of Indians have easy access to financial institutions?
Publicists of the government, however, will cite that after the success of Jan Dhan Yojna “every Indian family has bank accounts and today almost everyone who wants, has a bank account unless somebody voluntarily opts out” and this is proof that in less than two and a half years, the government has ensured that systems for transiting to cashless transactions have been put in place. It is pointed out that an advisory has been issued for government departments and other official agencies, both Central and at the State-level, to make payments in a cashless manner.
Credit card data is also cited to argue that Indians are increasingly opting for plastic money. Adherers of this viewpoint cite the fact that by March this year, a total of 24.51 million credit cards and 661.8 million debit cards had been issued. But, given the fact that most credit card holders, use more than one and that even after several years, the majority of users do not use debit cards except to withdraw cash from ATM machines, the use of currency continues to be the preferred route for making purchases and clearing bills.
There is no doubt that one part of India, especially the middle-middle classes and above, is increasingly opting for electronic forms of transaction and using their information and knowledge for their benefit. But this section does not comprise the majority which is still made up of people are either hovering below or around the poverty line and those who are marginally above them. As the controversy over zero-balance JDY has shown, having bank accounts is no guarantee that people are using banks regularly. Banking department figures also demonstrate that location of bank branches are skewed in favour of 60 Tier I and Tier II cities with branches in these two categories accounting for almost one-third of total banks in the country.
If one tallies the total population of these cities, one will realise how lopsided Indian banking system is. Besides, giving greater emphasis to banking in big urban centres, disconcertingly, economically less-developed and areas away from the national mainstream – both in terms of geographical location and national consciousness – are neglected by the banking industry. There are 38 districts in the country – mainly in the northeastern states – where there are less than 10 branches and it would be foolhardy to expect people here to transit from not approaching banks to going cashless.
The majority of Indians are no longer illiterate but that does not mean that the majority is technologically competent to conduct cashless transactions. Often, India’s vast mobile network and the number of mobile phones and connections used by people is cited to argue that people are using smartphones to access information related to their profession – be it weather forecast or commodity prices. Yet, the fact remains that for the majority of Indians, mobile phones, far from holders of e-wallet, remain just a simple device to make and receive calls, listen to some music and, of course, read SMSs sent by Modi ji’s department!
The government is trying to leapfrog India’s transactional practise by several decades. There are cultural reasons for people to stick to physical currency and this is not restricted to any class. The poignant tale about the matriarch of rural household who hid two Rs 500 rupee notes from others in the family by stitching these into the quilt with which she covers herself, is symbolic of the importance of paper currency in the Indian currency.
Bank notes provide security and comfort which the system denies to most. Some weeks ago, there had been an alarm all over the country when news spread that lakhs of debit cards had been compromised. India has several lines that divide the people into several sections. By presenting the ability to make a transition to cashless transactions a virtue, we will create a new group of deprived citizens and India could best avoid another category of have-nots.
India does not require an avatar Marie Antoinette. It is not the time for the government to say that if people have no cash, let them go cashless.
The author is a Delhi-based writer and journalist. He authored - Narendra Modi: The Man, The Times and Sikhs: The Untold Agony of 1984. Tweets @NilanjanUdwin