In his first full-year Budget, Finance Minister Arun Jaitley said he wants to discourage cash transactions and introduce measures that will incentivize credit or debit card transactions.
Here are the benefits of cashless transactions:
1) Curb the flow of black money: By discouraging cash transactions, the government aims to curb black money. To start with, the government might announce that certain transactions - such as buying jewellery or paying bills in five star hotels - will have to be compulsorily settled by cards, analysts say. The government will also have to ensure that more people have access to debit cards, especially in rural areas. Over 11 crore RuPay cards were in use as of January 31, 2015. (Read)
2) Reduce the cost of banking system: The use of cards over cash will be a big boost for commercial banks as it will help lenders reduce large manpower dedicated in handling cash.
3) Financial inclusion: The lack of wide spread electronic payments infrastructure makes it difficult for the financial industry to deliver micro-version of payment products in a sustainable way. The use of electronic payment instruments will allow the unbanked to start building a transaction history, which can be a step towards initiating them towards financial inclusion, SBI Caps Securities said.
4) Reduce soiling of notes: The Reserve Bank has to dispose of soiled paper currency bills worth several crores every year. On an average, one out of five paper notes in circulation (over 20 per cent) gets disposed of every year after getting soiled and the number of such soiled currency bills stood at over 13 billion units during the financial year ended March 31, 2013 according to the latest data available with RBI.
5) Benefit e-commerce companies: According to Bank of America Merrill Lynch, any rapid improvement in cashless transaction may help the e-commerce companies to gradually move away from cash on delivery, which currently contributes to over 60 per cent of total purchases.
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