Your cheque book could be the next casualty in Modi govt's push for digital transactions

Demonetisation was a big disruption for most Indians, right from poor labourers to big industrialists. It was, according to the government, the beginning of the push towards a less-cash society. The Centre could now be working on another disruptive step to boost digital transactions — banning the cheque book.

That's what a high functionary of a prominent trade body says. "In all probability, the Centre may withdraw the cheque book facility in the near future to encourage digital transactions,” Praveen Khandelwal, secretary general of Confederation of All India Traders (CAIT), told PTI recently.

Khandelwal was talking to reporters at the launch of ‘Digital Rath’, a joint initiative of the CAIT and Mastercard to encourage traders adopt different modes of digital transactions and promote cashless economy. "The government spends Rs 25,000 crore on printing of currency notes and another Rs 6,000 crore on their security and logistics. Moreover, banks charge 1 per cent on payments through debit and 2 per cent through credit cards. The government needs to incentivise this process by providing subsidy directly to the banks so these charges can be waived,” he said.

How much would ban on cheque books contribute to the cashless economy? It could be substantial as most of the business transactions are carried out through cheques. At present, more than 95% transactions happen via cash and cheques. Since cash transactions have declined, transaction by cheque might have increased after demonetisation.

Digital transactions have shown mixed trends after demonetisation, but overall cashless payments are much higher than in the pre-demonetisation months.

While cash in circulation at Rs 16.3 lakh crore is still at 91% of the pre-note ban days of Rs 17.9 lakh crore, digital transactions rose 31% from November last year to September this year, according to provisional RBI data. Digital transactions in September reached 877 million, down from the peak of almost 1 billion in December last year. If 100 transactions were happening pre-demonetisation, after the note ban it shot up to around 300, which now has stabilised around 180 or 190 levels.

But for India to meet the government's lofty goal of 25 billion digital payments by end of this fiscal still seems a tall order. A ban on cheque books might bring India closer to that target.