A cheque-less India? Possible; it may not be a big deal for common man but traders will suffer

In order to quicken the digitisation of the economy, the Narendra Modi government may do away with cheque books, according to various media reports. Unthinkable? For many, it could be. For one, cheque has been an integral part of our money lives. Especially, traders and small businesses are dependent on cheques, of not cash, for making transactions. According to media reports, more than 95 percent their transactions happen via cash/cheque route. Though physical cheques are a norm in India, at the back end they have transformed into what’s loosely called digital cheques as banks have implemented the cheque truncation system (CTS). CTS is a project put in place by the RBI. This gives banks the freedom to avoid transporting a physical cheque from the presenting bank (where the cheque is deposited) to the drawee bank (where it is issued). As per the CTS, instead of a physical cheque, an electronic image of the cheque is sent to the drawee bank. Since the cheque doesn’t actually move from one location to another, the time needed to clear the cheque is lesser. [caption id=“attachment_515384” align=“alignleft” width=“380”]  Representational image. Reuters[/caption] When it comes to most European countries cheque books are now rarely used or completely banned. In fact, banks in many countries discourage cheques by charging for them and making alternative cashless payment methods more attractive for customers. The UK had first planned to do away with cheques completely but a complete ban was not implemented keeping the older population in mind who are still heavy users. Instead, they adopted a cheque-photo plan, which allows people to pay in a cheque by taking a photo of it, rather than actually going to a bank to physically deposit it. It’s quite possible that cheque transactions may have increased manifold since demonetisation stunted cash transactions. There is no doubt that cheques are an expensive ordeal. As explained above, banks have already moved to CTS mode of processing, which, in a way, is digitisation. So if a ban happens, nothing much changes for banks on the process front. For retail customers too, life is unlikely to be impacted too much. The reason is, at least in the urban area, most of us have already stopped using cheque leafs because there are many other means to transact nowadays. For one, for our loan EMIs, where cheques were a must until recently, we set up an ECS arrangement with the bank. For other transactions, there are other modes such as debit/credit cards, mobile payments and online payments. All these modes allow you to track transactions, just like a cheque would and at the same time be part of the white economy. Traders and small businesses are definitely going to face some teething troubles. But they never resist the government’s decision. It has been so with even with the extremely disruptive GST and demonetisation. However, that doesn’t mean the government can shove a cheque ban down their throat. The policy-makers will have to keep in mind that they are already suffering due to GST and demonetisation. They will need handholding in case the government goes ahead with the decision. They should be given proper training to quickly move to a new system. The cheque-photo system that the UK uses is not a bad idea when it comes to slow and steady transition from cheque to cheque-less economy. As far as this moves goes, only time will tell if it will become a reality. But given this government’s track record, one cannot rule out the possibility of a sudden announcement.