The Narendra Modi government’s aim of making India a less-cash economy has been a non-starter so far. The country’s central bank has now blamed much of this on the lack of awareness among consumers and even bank employees.
“…(There is) lack of consumer awareness not just on the various payment options and features available, but even on the grievance redressal mechanisms available,” BP Kanungo, deputy governor of the Reserve Bank of India (RBI), said in Mumbai on Tuesday (May 29). “This illiteracy transcends all geographies and regions, not just rural or semi-urban, north or south, and is equally true of the staff at the front desks of bank branches.”
In November 2016, the Modi government carried out the demonetisation exercise and killed two high-value currency notes, which led to an acute cash shortage. One of the government’s stated objectives behind the disruptive move was to considerably reduce the economy’s dependence on cash. The government hoped Indians would take up digital payments. While this did happen in the months immediately after demonetisation, the usage dropped soon after. Over a year later, the amount of cash in circulation as a share of GDP has slowly inched back to pre note-ban levels.
Those who are looking to adopt electronic payments for the first time have also been put off by the systemic glitches, driving them back to the cash economy. “It is imperative that we harness technology to ensure this. Payment systems must ensure 100% accuracy,” Kanungo said.
Another challenge for users is the lack of effective redressal mechanisms in the ecosystem. This is an area that must be addressed to ensure that the system is transparent, easy, and effective, said the RBI deputy governor.
Besides, the online payments landscape is also over-crowded. Redundant products must be weeded out and the market and users should encourage consolidation, Kanungo added.
Yet, despite the bumpy ride, digital transactions are growing significantly. The increased penetration of mobile phones in the country and a young population ever-willing to adopt digital payments is expected to fuel future growth to nearly $1 trillion annually by 2025.
But before that, these roadblocks must be removed.