New Delhi: Soon after taking office in 2014, Prime Minister Narendra Modi had hinted at establishing a robust digital payments ecosystem to curb illicit monetary transactions, besides moving towards a less-cash, digital economy.
A little over two years into his tenure, he took the most disruptive economic measure towards achieving that goal, with the 8 November 2016 announcement invalidating 86% of currency in circulation.
In the month following the withdrawal of the old Rs500 and Rs1,000 notes as legal tender, the number of digital transactions zoomed to 957.5 million, according to the Reserve Bank of India.
In his 25 December 2016, address the prime minister was emphatic with his words to promote cashless transactions among both traders and consumers: “Be it villages or towns, the educated or the illiterate, there is an atmosphere of curiosity as to what is cashless, how cashless business can take place…everybody wants to understand and learn from each other.”
Subsequently, however, digital transactions witnessed a steady decline with the central bank pumping cash back into the system.
But last December, the number of electronic transfers breached the 1 billion mark for the first time ever. In fact, digital transactions rose 4.73% to 1.11 billion in January 2018 from 1.06 billion in the previous month, according to RBI.
The government has also developed secure platforms for money transfer, and encouraged private players in the financial space, including banks, to roll out e-payments services with adequate security features.
The state-promoted Unified Payments Interface (UPI), which was developed and launched in August 2016, has seen rapid adoption over the past two years. In April, more than 190 million transactions worth Rs27,021 crore have taken place on the platform.
UPI, which facilitates instant fund transfer between two bank accounts using mobile phones without sharing details of beneficiary bank accounts, is used by 97 banks.
Besides, Bharat Bill Payment System (BBPS), which was launched to make easy payment of utility bills, has also triggered the private sector to innovate further.
Other payment modes, such as credit and debit cards, unstructured supplementary service data, prepaid payment instruments and internet banking, have also witnessed a surge in the number of users.
To push digital payments further, the government has also decided to waive off the merchant discount rates applicable on debit cards, BHIM, UPI and Aadhaar-enabled payments system of up to Rs2,000 for two years with effect from 1 January 2018.
The centre aims to grow India’s digital economy to $1 trillion by 2022. It is now focusing on getting merchants on the BHIM-UPI platform, besides promoting payments through QR code. Getting more vehicles to adopt FASTag, is another way of promoting cashless payments that the government is looking to pursue.
