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Rediff.com  » Business » FinMin, RBI set up panel on reducing cash transactions

FinMin, RBI set up panel on reducing cash transactions

By Nupur Anand
June 01, 2015 17:45 IST
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RBIApart from checking the flow of unaccounted money, reduction in cash usage is held to improve cost effectiveness for banks

To reduce cash transactions in the economy and boost the usage of cards and point of sales terminals, the Union finance ministry and Reserve Bank of India have set up a committee to look at ways to encourage use of plastic money.

The committee has representatives from National Payments Corporation of India, State Bank of India and ICICI Bank. It was formed last month.

A source said it would also look at ways to widen the spread of PoS machines and other enabling infrastructure to increase card acceptance.

Last year, RBI had said it was mulling whether to link the deployment of PoS machines by a bank to the number of cards being disbursed.

RBI data at the end of December 2014 showed 1.05 million PoS machines in the country, whereas there are over 500 mn debit cards and at least 20 mn credit cards.

In 2013-14, according to a Boston Consulting Group report, the number of cash transactions in the economy was 26 per cent of the total; cheque transactions were 19 per cent.

Another 37 per cent were through ATMs or cash deposit machines.

Transfer through ECS systems was three per cent; NEFT/RTGS use was four per cent. PoS accounted for five per cent and transactions through the internet were six per cent.

The eventual aim is to move to a cashless economy.

RBI has said it would soon be issuing a discussion paper on this.

This ties in with the government’s focus on addressing the issue of undisclosed incomes.

It has taken steps to improve the use of credit and debit cards and has put limits on cash transactions.

For instance, quoting a PAN (income tax record) number has been made mandatory for any sale or purchase over Rs 100,000.

Apart from checking the flow of unaccounted money, reduction in cash usage is held to improve cost effectiveness for banks.

“By digitising processes end-to-end, engaging customers on the digital channel for sales and transactions, and collectively working towards eradication of cash, banks can achieve up to a 30 per cent jump in sales productivity, reduce administrative staff by 10-15 per cent and improve back-office staff productivity by 20 per cent,” said the BCG report.

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Nupur Anand in Mumbai
Source: source
 

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