The Oct 8 announcement by PM Narendra Modi ushering the demonetization of Rs 1,000 and Rs 500 note s has a definite ring of sincerity and earnestness to it. By addressing the effort towards the removal of unaccounted cash and thereby engendering growth and equitable wealth amongst the nation’s many underprivileged and less fortunate, the move is an admirable one. One of the immediate impacts of this move is, unfortunately, the wait for cash and the consequent hardship resultant upon putting, in a manner of speaking,the entire nation in a queue. Could one have done this differently? This question is not really germane at this point in time, the real elephant in the room is this: is India ready for a non-cash or a low-cash regime? The answer is no. However,it can beready, and should be so too, as a potential global financial super-power. And that is where alternative solutions to credit and cash choices amongst India’s under-banked and un-banked really will work.
The nation’s agriculture-based economy and the rural populace are still largely reliant on a cash-based economy and the benefits of financial inclusion as well as fintech innovations such as e-Wallets and virtual banking are still to reach this vast majority. In this scenario, reaching millions of ‘beyond-the-pale’ financially excluded populations is the crying need of the hour. In recent years, correspondent banking has proven to be one of the most promising strategies for offering financial services in emerging and untapped markets.India has around 1, 05,813 branches of scheduled commercial banks for a population of around 1.25 billion i.e. approximately 1 branch per 12,000 people. As a non-expensive and secure way of providing liquidity to the large sections of off-the-grid people, correspondent banking and its attendant tools posit a workable and long-term redressal of evolving and transitioning our economy to a growth path that reflects the coming of age of India’s digitally networked economy.
The basic grouse of the majority of people not appreciating the long-term gain for short-term pain here post demonetization is the highly reduced access to their own money. Banks and post-offices as well as all the other financial organizations, such as those providing e-Wallets and credit-lines, may be encouraged to aquainttheir customers with more effective solutions such as the pre-paid payment card systems. These cashless payment offerings, consisting of ultra-low cost payment network operation, enabling debit and prepaid card transactions is the answer to the challenge of financial inclusivity from the monetary dimension of the spend equation. The solution provider has to be a technology-centric, pro-consumer company with a passion to reinvent transaction banking for the masses.
The bogey of a shadow economy, verily the black money industry, affects the financial independence of the country as a whole. Demonetization will most surely prove a deterrent to these ‘black’ players. The effort, however, to mitigate and assuage the trauma bring faced by the suffering, innocent majority should be well thought out and expansive. It should always be remembered that while generally the love of money is the cause of all evil, no money is the cause of all ill-will. Using a judicious mix of policy, intention and technology, a positive fall-out can be well within our reach.