Cashless gateway to European Union
that card transaction is restricted for costly goods, was gone. Now after one year, our observations are as below: 1. Initially cashless transactions in retail sector reached level of 35% in first two months. Due to this, lines in front of the local bank came to end. However after cash came freely into circulation, the cashless transactions in retail market declined to almost 20%. On the contrary, wholesale market continued to grow and today almost 100% wholesale trade is cashless. Thus, presently around 52% of total transactions in Dhasai are done cashless.
2. The reasons that we observed for decline in retail sector that can be easily remedied, are cited here under:
a. For petty transactions, cash is being used again. The reason is that for petty transactions, most people sent their children. We have repeatedly requested local banks to issue debit cards to children above 12 years. But it has not happened yet. This is reflected in reduction of cashless transactions.
b. Illiterate people are being denied debit cards, even though there is provision in Jan-Dhan scheme for it. This factor restricted any further growth in cashless transactions.
c. 50 to 60 small villages in the area depend upon Dhasai market for all their needs. The population in the area is mostly tribal. Making baskets from bamboo and working as field laborers is their main source of income. Coming to Dhasai for bank transactions will cost them up to Rs 40 in transport and about 4 hours of time. So, the difficult access to the bank is also a major reason for lack of growth in cashless transactions.
In the meantime, Government has come up with a BHIM App. It’s the most advanced and easy-to-use app in the world. Payment made through this is real time and direct from P2P. With Aadhar as KYC instrument and linking of bank accounts to Aadhar and mobiles, this app is very safe. In fact, European Bank customers will be able to have such services only in January, after PSD2 comes into existence. But RBI has already acted upon open-banking concept by introduction of BHIM app. The app is also illiterate friendly.
Hence, we started to promote this app. But due some basic limitations, people in remote areas are unable to use it. One limitation is that BHIM app needs debit card number for user authentication. But as discussed above, banks are, currently, not issuing/promoting cards. Out of 27 thousand accounts in district Co-operative banks, only three to four thousand account holders have debit cards.
Further, in villages around Dhasai, internet is not available. Even if it is available, data package costs are prohibitive. Why pay for digital transactions, when cash payments are free?
Last and the most important problem is remoteness to Banks that makes them difficult to deposit their earnings in the bank. This is a major hurdle in the path towards cashless economy.
Though Indian banking is already far ahead than rest of the world in terms of technical capability, Open-Banking will only remain a dream, unless these hurdles are crossed.
Therefore, I suggest the installation of small router with booster antenna in every village is necessary to make small area of about 100 sqft Wi-Fi. In Maharashtra, every village has solar street lamps. If routers are installed on the same pole, electricity is not a problem. This free Wi-Fi spot will be used for mobile transactions. Further, BHIM authentication should be based on Aadhar, so that everybody with bank account will be able to use BHIM app. Only after these steps are taken, and not before, aggressive campaign for use of BHIM app should be undertaken.
In Thane, weaving of bamboo basket is major source of income for tribal people. So, the market place for these baskets should be made connected to Wi-Fi and traders should be persuaded to make payments via BHIM App. Using BHIM app, money can be sent to a payment address or to a bank account on real time basis. If the income goes directly to the banks, people will use BHIM app for most of their transactions because of the difficult access to bank – a weakness turned into strength.
With such steps taken, I am sure that not only Indian Banking System will be capable of facing the challenge of Open-Banking, but will also be instrumental in development of rural economy.