The demonetization of about 86% of currency in circulation followed by a slow trickle to make currency available (fueled by capacity constraints on printing new currency as well as strict limits on cash withdrawals from banking channels), has begun to push up the acceptance of cashless transactions in the country. It has further helped that RBI has mandated waiver of MDR for a defined period to promote cashless transactions.
A number of smaller merchants have latched on to technologies from Prepaid instrument providers, who have a closed or semi-closed system. As PPIs migrate to become full players in the Unified Payment Interface regime, the true power of UPI will come to the fore. This will allow a small tea and snack vendor or a coconut water vendor to effectively accept any form of non-cash instrument approved by RBI. USSD transactions are being pushed by telcos for those without smartphones, and given the smartphone penetration in India, that is a cashless transaction method being favoured.
A number of people have already started to pay their maids, drivers, cleaners etc. electronically. Since availability of currency is higher in denomination of 2000, and lack of change makes it practically unusable unless one is buying about 1500 worth of goods, the workers who relied on cash are learning to transact electronically as well. Availability of Jan Dhan accounts has made this access easier... the folks who were maintaining zero balance Jan Dhan accounts are now beginning to transact in it, and finding it convenient than carrying cash. Most stores are no longer insisting on minimum 100 or 200 for usage of non-cash methods for fear of losing the business altogether.
Overall, though economy is expected to go downhill for couple of quarters at least due to reduced overall economic activity, the proportion of cashless transactions has certainly taken a quantum leap.
A number of smaller merchants have latched on to technologies from Prepaid instrument providers, who have a closed or semi-closed system. As PPIs migrate to become full players in the Unified Payment Interface regime, the true power of UPI will come to the fore. This will allow a small tea and snack vendor or a coconut water vendor to effectively accept any form of non-cash instrument approved by RBI. USSD transactions are being pushed by telcos for those without smartphones, and given the smartphone penetration in India, that is a cashless transaction method being favoured.
A number of people have already started to pay their maids, drivers, cleaners etc. electronically. Since availability of currency is higher in denomination of 2000, and lack of change makes it practically unusable unless one is buying about 1500 worth of goods, the workers who relied on cash are learning to transact electronically as well. Availability of Jan Dhan accounts has made this access easier... the folks who were maintaining zero balance Jan Dhan accounts are now beginning to transact in it, and finding it convenient than carrying cash. Most stores are no longer insisting on minimum 100 or 200 for usage of non-cash methods for fear of losing the business altogether.
Overall, though economy is expected to go downhill for couple of quarters at least due to reduced overall economic activity, the proportion of cashless transactions has certainly taken a quantum leap.
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