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Approximately 11% of urban Indian households have embraced cashless transactions, but penetration of cashless transaction is still at a meagre 0.43%, according to a report by India Development Fund (IDF) and Internet and Mobile Association of India (IAMAI).
Titled “Road to Less Cash'' the report says that the two main reasons for not using cashless transaction are either the seller or merchant not accepting cards or lack awareness among consumers. The study was sponsored by Visa and ItzCash.
According to the study with over Rs 1 lakh crore of cash circulating, a transformation of 1% moving to cashless transactions can reduce cash circulation by Rs 100 crore. A moderate growth of cashless transactions by 5 percent a year will save the country more than Rs 500 crore annually.
Inducing MNREGS beneficiaries to undertake cashless transactions would immediately mean that around 52 million households from rural India will be part of the cashless network, the report says.
Out of the MNREGS payment, even if 10% is spent on cashless expenditure, would mean that close to Rs 3,000 crore will be the additional cashless transaction leading to an annual savings of Rs 25 crore on printing and managing currency.
Shifting to cashless transactions from cash transactions would mean more use of electronic payments. That itself is a big reason to encourage cash less transactions, since electronic payments will in turn bring more people into the folds of formal economy, the report said.
Hence, there is a need to dis-incentivise cash and accelerate acceptance of electronic payment channels. While the e-payments industry continues to ensure that more and more Indians have access to e-payment instruments, there is no incentive for them to use their card in lieu of cash.
Naveen Surya, Managing Director, ItzCash Card Ltd, said, “Creation of an e-payment ecosystem depends on the success of multiple factors like merchants, POS infrastructure, E-wallet, mobile applications, net banking, etc.”
